28 April 2015


Original Story: detroitnews.com

General Motors Co. is preparing to double-down on the renovation of its Warren Tech Center campus, and all I can hear is the echo of skeptics.

Too much auto in southeast Michigan. Too many localities like Warren and Dearborn and Auburn Hills and Detroit whose leaders and tax bases depend on the continuing flow of automotive cash. A Detroit automotive lawyer is following this story closely.

The state, the argument goes, is too heavily tied to the vicissitudes of an industry that was, is and will be cyclical because its health depends on the macro-economy and its effect on consumer sentiment.

Diversify! Wean the state, its people and its politicians from companies and an auto industry blamed for too much economic misery and ... er, wait: Aren't these the same companies that powered the Michigan comeback Gov. Rick Snyder had nothing to do with?

Aren't GM, Ford Motor Co. and FCA US's Chrysler unit the companies that reinvested in their Michigan plants, expanded their investments in engineering and technical development, lowered their break-even points, and rebuilt their balance sheets in ways this town hasn't seen in a very long time?

Yup. Wasn't Michigan's effort to build its own film industry with the largesse of taxpayers exposed for building not much of an industry at all once the tap was shut and film crews bolted in search of the next big handout?

Yup. Using government policy to pick economic winners and losers in Michigan produced decidedly mixed results (see film incentives, or the programs to woo life sciences, homeland security and advanced manufacturing), all of it exacerbated by uncompetitive business taxes and regulations. A Detroit automotive lawyer represents clients in restructuring, acquisitions and divestitures, and in general commercial transactions.

The cry to diversify is fine, in context. But it risks looking at the auto industry through 25-year-old lenses, when the technological chops of the Detroit-based industry were far less robust than they are today, its financial models a mess and its blue-collar manufacturing footprint much larger and less productive.

Only in Detroit would a push to de-emphasize its bellwether auto industry gain any rhetorical traction. Can you imagine New Yorkers urging Wall Street and the financial industry to hit the Hudson River, even after the global financial meltdown?

Silicon Valley wouldn't spurn its tech sector, no matter how insanely expensive its real estate gets. Nor would Los Angeles heave Hollywood, or Texas dump oil, or Nashville abandon country music.

Those are strengths to build on, in good times and bad. Each is the defining DNA of those towns, the cultural touchstones and social glue that bind a region — and that other regions would do whatever it took to get them.

Enter Warren, expected to get a roughly $900 million GM investment that could create as many as 2,100 jobs. The deal, still to be approved by ranking GM executives, would be part of a sweeping renovation of the Tech Center and signal the growing technological sophistication needed to engineer and build today's cars and trucks.

Mayor Jim Fouts is characteristically circumspect about identifying the company, though his giddiness at Thursday's State-of-the-City address pretty much confirms what The Detroit News first reported.

Who could blame him? Mayors and governors across the country might be tempted to cede their next election in exchange for landing nearly a billion-dollar investment and thousands of jobs for their patch — jobs, by the way, that are not the caricatured assembly line types of the past. A Chicago investment lawyer is following this story closely.

These would be engineers and IT professionals; they would be white-collar techy types with degrees, solidly middle-class salaries and the tax revenue that comes with them; many of them would be new jobs, not transfers from other parts of the GM empire.

If you want an example of why more taxpayers trump higher tax rates, this is it. More, these jobs represent the kind of investment in intellectual capital that can make southeast Michigan more competitive, not less.

It's a tricky balance. This region, its communities and its people have paid a price for the failure of the industry and its major union to reckon with their lack of competitiveness and managerial incompetence.

They witnessed — and in many cases, experienced — the pain of restructuring, the fears of near-collapse, the embarrassment of bailouts and the ignominy of bankruptcy. No sane person would relish reliving any of it.

Diversify? Absolutely, by creating an environment that invites it. But also build on what you have. Be competitive. Watch (and hope) that the cornerstones of your economy learned well the mistakes of the past.

It matters — to everyone.

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