Saturday, October 11, 2008

Coping with the Possibility of Doomsday

Michigan and Detroit are synonymous with the wheeled motor vehicle for transporting passengers, also known as the automobile. This has been true for just about one hundred years now, and the motor car will always be a proud part of our heritage. This is an obvious statement, and more than a few books have been written about the automobile industry. The companies responsible for the automobile industry in Detroit, including the Fords and GMs as well as the suppliers and suppliers' suppliers, have periodically brought population, prosperity, and stability to our great state as well as other states and countries around the world. To this day, the automobile industry remains the primary pillar of Michigan's economy, and the bankruptcy/failure of GM, Ford, or Chrysler would certainly have devastating shockwaves. These shockwaves will start and be centralized in Michigan, but will ripple throughout the world. In saying this, I am not trying to be overly dramatic, but it is easy to overlook all of the tangential people who are in some way related to the domestic (US) auto industry. This week (well, really the last two years but this week in particular) has renewed concerns about the failure of one or all of the Michigan automobile manufacturers. Everyone in the world is hurting right now, but Michigan is staring catastrophe in the face in a very unique and individual way. Last night, news emerged that Chrysler and GM were considering some sort of merger as another attempt to keep operations moving until the broader economy can get back on track. This is all quite scary for those of us who would like to continue to call Michigan home. Selfishly, I wish nothing but great success for all domestic automobile companies, but I want to spend some time reflecting on how, over the long term, Michigan can survive and thrive despite the possible destruction of US auto. Without having a contingency plan (or hope) for Michigan's future, the present can be pretty difficult to deal with.

Let's start with an easy and non-inflammatory issue. Michigan has a ridiculously huge quantity of engineers. Currently, the vast majority of these educated people are somehow employed in the car realm, because that is where the jobs currently exist. At the same time, there is a general perception that Michigan is strongly lacking in entrepreneurial spirit because most of us have grown complacent in the former safety and comfort of the automobile industry. In this safety, the drive toward entrepreneurship, industry diversification, and company creation (those companies not affiliated with cars) is discouraged - or at least not as necessary. This fire, the kind of fire that can be found in Silicon Valley and the Boston area, has been almost genetically removed from Michigan residents. Don't rock the boat, keep the autos alive, and all shall be provided. I don't fault us for developing this viewpoint because it worked well for so long, and I think it is a natural result of our previous industrial environment.

Hypothetically tomorrow, GM, Ford, and Chrysler call all their employees into a room and say "That's it, game's over. Thanks for the memories." In that moment, all of the educated and experienced professionals in these companies are free agents. This includes executives and managers, engineers, sales people, marketers, consultants, laborers, IT people, computer programmers, administrative staff, facilities managers, and on down the line. However, before most of these people can move on and take a job elsewhere, they need to be able to sell their primary asset - their homes. Uh-oh...since the major employers are no longer viable, selling these homes is not really an option, so what's a person to do?

I envision an explosion of entrepreneurship in Michigan. Intelligent, incredibly motivated, and hungry people will do whatever they need to provide for their families and themselves. People will be forced to learn how to create jobs in industries that are non-existent or only currently bit players in Michigan. I think it would be incredibly foolish to undersell the capabilities of those currently employed in the automobile industry because of the challenges of that industrial sector. Google started in a garage. So did Microsoft, and mostly Apple for that matter. William Durant, the generally accepted founder of GM, was a high school drop out. Nothing can force innovation like the biggest kick in the butt in the world, and doomsday could be the necessary reboot for revival.

Entrepreneurship will be one of the structural supports of Michigan's future. However, this is not mutually exclusive from attracting other stable and growing companies and industries to Michigan. Because of our former industrial fortitude, Michigan has world-class infrastructure capabilities. Freeways, railroads, shipping lanes, and manufacturing and testing facilities, are already established to support multiple industrial powerhouses. On top of the infrastructural elements, Michigan will sport a huge and qualified available working population (remember, all those people who were put on the street from auto and are closely tied to the state for some reason or another).

"OK, I agree so far," you're thinking, "but why hasn't Michigan been able previously attract other companies and employment opportunities?" A few reasons, to be sure, but my understanding is that there are three main reasons why companies have been reluctant to set up any operations in Michigan. First, companies are reluctant to work with the UAW. The UAW has some truly fantastic accomplishments through the years, including establishing and increasing quality of work conditions, wages, and employee protection. The UAW continues to admirably support its members, but in some respects, this organization has strongly discouraged other companies from coming our way. Straight out, they refuse to work with the UAW. It's hard to say exactly what the end of the domestic auto industry would mean for the UAW, but it is abundantly clear that it could not exist in its current form.

Second, Michigan has a convoluted and difficult to understand tax structure that has been born from a history of successful, giant corporations and all of those companies that feed these corporations. I have heard second-hand from accountants the joke that "If you want to start business in Michigan, don't" because of the complicated and disagreeable tax code. In the absence of these giant corporations, Michigan tax law will need to be entirely rethought and rewritten to promote job growth and company creation. Inertia has kept the necessary tax changes from occurring in the past, but this inertia will absolutely have to be obliterated to attract and retain jobs. Third, other companies have historically refused to play second-fiddle to Detroit's car companies. Because of the historic success of the automobile industry, Michigan has had more than a little favoritism for these companies, and the perception of this favoritism has done its part to keep other companies away from our region. No autos, no favorites, what can we possibly do to bring you here?

This potential period of rebirth and growth will be exceedingly painful, but we have proven ourselves to be a resilient and capable people. We have become so historically accustomed to success with minimum pain that the angst of this kind of massive statewide restructuring seems unbearable, and we feel the eventual success on the other side of this effort will never fully present itself. If this doomsday situation does materialize, we will all be deeply hurt, but what else are we going to do? Crawl into a fetal position and give up? Screw that.

1 comment:

Zachary said...

Ken!!! I like the blog... read some of your postings last evening, and while eating this Five Dollar Footloooooong. Couple of the things I wanted to hit on that I noticed you blogged on. Heroes totally blows these days. There's entirely too many characters. I really liked the show when it started... then it just became absurd. It feels like Jurassic Park 3 where they replace a good plotline and compelling characters with loads and loads of dinosaurs (i.e. superpowers). While I feel Lost has mostly stayed pretty solid, I also feel that all of these high-budgeted new style hour-long shows (like Prison Break and the such) are in many ways all doomed. They have a storyline, and when the show has some early success they can't just end it in a way that would make sense plot-wise. Take Lost for instance. You would like to think that there is an underlying truth/meaning to the story. While it may not be known to the viewer, the creators of the show have always known what this was in much the way that the Harry Potter lady always had a crude outline of what Harry Potter's destiny would be in her head. I don't think that is the case now w/ Lost, and definately not with Heroes... and while still possibly entertaining I find it makes these shows somewhat less satisfying.

On a different note... I also see a lot of gloom for the Big 3. I would bet on out and out bankruptcy for all 3 if natural market forces were allowed to play out to fruition (which I doubt will happen). Who is going to be buying cars in this kind of economic environment and uncertainty??

Anyways, gotta get going.. talk to you soon though hopefully.