Thank you to the Wayne State School of Business Administration and the Women’s Economic Club for inviting me here today.
I am honored to be here and to have the opportunity to share my views on one of the more critical topics of our current times. I am also fortunate to have my wife, mother and aunt here and I thank them for their attendance. Especially, my wife who has also brought with her our soon to be third child, as she is expecting.
In the New York Times Best Seller list, the book “Now Discover Your Strengths” has made quite a splash. The authors suggest that human resource departments & managers in particular — and business institutions in general — should clearly identify themes of strength. Rather than listing weaknesses in the way we go about our jobs, the authors suggest that knowing and exploiting our strengths will yield maximum results. This premise is particularly helpful for our discussion today: competitiveness in uncertain times.
Our state lies in a region whose economic foundation is built on manufacturing high value, high quality automobiles. Of course we have other industries, but in the macro view of our state’s economy this is the only one that counts. The auto industry is our strength. Like the best selling authors suggest, this is what we should build on.
That’s the positive view. The negative view frames our challenge and the topic of today’s discussion. In my opinion ” Michigan competitiveness” means can we successfully compete for control over the center of the automotive world, and ” uncertain times” means will we be successful in doing so with a bad economy to boot.
Japan , Mexico , Brazil , China , Mississippi , Alabama , and Tennessee — just to name a few — are fierce competitors. Make no mistake before September 11th our state’s automotive jewels were the target and desire of many green-eyed foreign countries and other “have-not” states. And since September 11th and the harsh economic realities of its aftermath, the jealousy and competition will grow. Everyone wants what we have and we must sober to this fact.
If we as a state or a region were to honestly and objectively examine our economic future we would see a big change in the way we carry out our responsibility to keep the auto industry and build on its strengths. Toyota has selected southern Ontario as the new home of one its large assembly plants in the late ’90’s. The auto industry is our State’s pillar of economic strength, but where were the headlines in the media that said ” Michigan loses race with Ontario for new auto plant?” Where’s the editorial that questions our ability to sustain the auto industry in our state because it’s not just that we lost the race for the new Toyota assembly plant, but the fact is we weren’t even in the race.
The last time I recall the people of our state being sincerely interested in even competing for that which most of us owe our livelihoods, was over some years ago when Arlington, Texas, came out of no where with an old plant, hemmed in by a growing and developing city, to clobber Ypsilanti, and take another plant away.
Every region of the world, including our sister states want what we have, and to date they have been successful in starting to take it. But, like failing to notice an elephant in the living room, we have not put up a fight let alone noticed our nose was already bloodied.
Other non-automotive firms are very important to our region and state as well, but they just don’t impact our lives like the auto industry. While Michigan’s tech firms have gained national prominence the past few years, do any one of these tech firms firms have annual revenue that surpasses the regular budget of GM or Ford’s IT departments?. So what can we do to guard and build our automotive strength?
The question is better asked in the negative.
What should we not do if we want to keep the auto industry in Michigan ?
First, we should not take for granted or ignore our transportation network. Detroit continues to be branded, “The Motor City” — and with good reason. Ford, GM & DaimlerChrysler are the critical mass of Southeast Michigan .
A true transportation hub, it’s no coincidence that our highway infrastructure bears names like, “The Ford Freeway,” “The Chrysler,” and the ” Walter Ruether Highway .”
We shouldn’t let our once strong infrastructure backbone of roads, highways, railways, bridges and tunnels choke off our regions #1 advantage for keeping the auto industry here: The proximity to its supply base of thousands of auto suppliers happens to be situated right here in our backyard. This is a major geographical and competitive advantage, reducing transit times, enhancing just in time deliveries, keeping transportation costs low, and keeping inventories low.
But if we sit idly by and get used to rolling down I-75 or I-94 at an average speed of 25 m.p.h., or if we make do by patching pot holes on the Ford Freeway, instead of adding two more lanes in each direction, or if we put up with the lack of adequate customs and immigration staffing at our critical border points, the increased cost of the truckload freight to Mexico doesn’t look so bad, after all maybe the supplier will eventually move its plant down there too.
Second, we should not constrict the competitiveness of the auto industry. We shouldn’t let our governments carve up the goose that lays the golden eggs. While we take notice that the state’s Single Business Tax has in the past year or two begun to roll back an infinitely small fraction at a time over the next 10 plus years, we might want to consider that Mississippi not only doesn’t tax auto companies even when they lose money, like our state’s Single Business Tax, but they, on the other hand, have assembled 1,000 acres of land and have virtually given it and the necessary financing to Nissan to build a brand new Assembly plant in their City of Canton. That plant is under construction right now. I know as an auto supplier, our company has been asked by Nissan and Canton Mississippi to erect our own logistics center down there right next to the plant. With an idea of what we should not do, what is it that we can do to ensure an appropriate reaction to our current economic challenges?.
We simply have to be personally involved in the process of decision making. Detroit has a new mayor, and we wish Kwame Kilpatrick the best of success. We all have a stake in Detroit ’s recovery, and we all have a stake in Detroit ’s recovery, and we all are aware of the challenges that the region faces. Michigan has already begun the election year preparations for a governor to follow John Engler. Our involvement in the business issues and then communicating our solutions to those whose votes count more than ours is important at a time like this. Government support is critical, it must be an “investor.”
The third thing we can do is embrace our automotive heritage and work toward the “supplier village” concept. The term “supplier village” is where suppliers are located in close proximity to assembly plants and this certainly plays to Michigan ’s natural advantage. The supply chain of the industry requires a network of suppliers and support facilities immediately accessible to the plant. Consider this sobering fact: April of this year was the first month that the domestic auto industry built fewer cars than foreign brands.
This is a subtle, yet critical indicator that residents and leaders will have to address in the near and long range range future. With no expansion of assembly plants, automakers have instead pushed production limits in existing facilities.
We need to encourage, accommodate and embrace this supplier village in our state through improved infrastructure and through a pro-supplier development environment that encourages the growth of our local supplier village.
There is plenty to do in order to keep and build our economic strength in the auto industry. I’ve tried to highlight some of our region’s economic strengths which will be vital to helping to pull us all through this challenging economic time.
The strength we can all add to our State’s economic foundation is extremely important.
Thank you.
