Detroit is enjoying a renaissance this year. Chrysler and GM have begun to pay off considerable chunks of their bailout receipts and all Big Three auto manufacturers – Ford, GM, and Chrysler – posted profits in the third quarter. In sports, the Tigers made it to the ALCS with AL Cy Young and MVP Justin Verlander, and the Lions have a chance to hand reigning champs Green Bay its first loss of the year. The city’s morale has been buoyed by an influx of young entrepreneurs, eliciting comparisons to Brooklyn’s hipster-friendly Williamsburg by the New York Times.
After limping on life support for years, the Motor City’s auto industry and sports teams finds themselves in this unlikely situation due to outside intervention with savvy use of assistance leading to better product on the field and the assembly line and renewed faith in Detroit.
Detroit’s struggles began long before GM and Chrysler needed bailouts to stay alive. As American auto sales declined in the face of rising Asian autos and union pensions bogged down profit margins, American auto slowly walked to its apparent doom. Chapter 11 bankruptcy allowed GM and Chrysler to restructure their debt and pensions with the help of bankruptcy attorneys, but without the government’s bailout and an improved line of cars, both would be out of gas.
The bailout remains one of the most controversial decisions in recent current events. Many questioned whether the Big Three were beyond repair. Detroit’s reputation led Gary Ackerman (D-NY) to challenge automakers to “sell cars that people want.” Detroit responded to the challenge, creating cars that for once surpassed their foreign competitors.
In 2010, the Big Three outperformed Asian brands in JD Power’s ratings for the first time in its history. And buyers are noticing too. At the end of 2008, when the bailouts were being negotiated, 15% of Americans reported they would not buy an American car. By March 2010, that number was down to 6%.
With the improved product line, Chrysler has been able to pay off most of its loans to the government as well as Fiat, which helped finance the second bailout. Detroit auto’s resurgence mirrors the Lions’ path to success.
The Lions, an NFL bottom-dweller for most of this decade, have benefited from the redistributive NFL draft. In order to increase parity amongst teams, the NFL rewards the worst teams in the league with the highest picks in its annual draft.
Today’s starting quarterback, Matt Stafford, leading rusher Jahvid Best, defensive phenom Ndamukong Suh, receiver Calvin Johnson, and tight end Brandon Pettigrew (who was acquired when former No. 7 pick Roy Williams was dealt to the Cowboys all came to the Lions through first round draft picks. Three — Stafford, Johnson, and Suh — were top five picks.
The group has played a critical role in the Lion’s resurgence, evidencing the effects of redistributive policies. But even with help from the draft, the Lions would not be where they are without coach Jim Schwartz who has brought a hardnosed attitude to the team that has brought discipline and structure to the team.
Jim Schwartz started coaching in 2009, and though he didn’t see immediate wins, he preached discipline in every aspect of the game which forged an identity for this young team. Last season, the team didn't give up in close games despite a losing record, and now the Lions are poised to make the playoffs for the first time.
Detroit’s rebirths on the field and in the maunfacturing plan stem from hard work, smart decisions, and good management, but they owe a great debt to outside intervention as well. Without Schwartz's disciplined coaching and a revamped product line, Detroit would still be in shambles.
Photo Credit: Dave Hogg
The Discussion
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Why didn't the gov't bailout Blockbuster? Sure Netflix had a far better business model, but think of all the jobs that could have been saved propping up a zombie company.
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Why did the auto execs need a Congressman to tell them to sell cars that people want? Did they not have enough common sense to know that business is all about selling products people want? The US auto industry has been ailing for decades; why did it take a gov't bailout to make the Big Three wake up and smell the gas? I hope Washington doesn't plan on bailing out every stupidly mismanaged industry in the economy...
I read the hyper-linked Bloomberg article under the line without government bailout but it does not mention how a government bailout saved GM and Chrysler.
And how much better off would Ford be without the bailouts?
Why couldn't GM and Chrysler have filed for bankruptcy w/o federal bailout money?
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