Tuesday, February 23, 2010

GM leaving Detroit


Could General Motors be headed out of Detroit? These days, nothing is unthinkable. During a briefing with reporters today, General Motors CEO Fritz Henderson was asked if the company would move from its glass tower headquarters in downtown Detroit. That idea was kicked around in the local papers last week. Henderson was hardly convincing in his denial that GM could move. He said “We’re looking at everything,” but added that “we don’t have any plans” to move the headquarters. That answer has even less conviction that George H.W. Bush’s “read my lips” quote about no new taxes.

Just think about the severe body blow to the Detroit and Michigan economies. The city is already a disaster. Reeling from years of layoffs, Detroit now has an unemployment rate around 21%. Urban blight is everywhere. The area around Detroit has fared slightly better (which is to say that it’s not a complete wreckage) but the region’s unemployment rate is around 15%. Parts makers teeter on the edge of bankruptcy, as does GM. Chrysler is already in court. And Comerica Bank moved its headquarters to Dallas a couple of years ago. Even Volkswagen of America got out of town, moving its U.S. office to Virginia.

If GM left for suburban Detroit, as one local mayor suggested, the move would simply mean that so many white-collar jobs were cut that GM could consolidate them to other offices. If the company got out of town altogether, Detroit would be permanently damaged. Ditto for the suburbs is Chrysler doesn’t make it. The company’s headquarters was designed to be converted into a giant shopping mall. But who will be left to shop there would be a mystery.

When people talk about the city rebounding, they point to Pittsburgh after the decline of steel. The three rivers aren’t lined with mile-long mills anymore. Only a few blast furnaces flash in the night sky anywhere near downtown. But Pittsburgh’s city center still houses the likes of U.S. Steel, Alcoa, Mellon and PNC Banks and PPG Industries. If Detroit starts to lose the last of its management jobs, forget about a recovery. The city will become a tale of urban decay like we have never seen.

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