Changes ahead for auto industry provide opportunity for region

The Future Is Cloudy and Bright 

By Sandy K. Baruah 

January is always an exciting time in the Detroit region. The promise of a new year, and of course, the arrival of the North American International Auto Show, one of the premier global events on the automotive calendar and an opportunity to not only showcase the world-leading mobility assets of our region, but also the incredible and real urban renaissance of the city of Detroit.

High resolution headshot

2017, however, brings an unprecedented number of questions that could potentially impact our mobility industry.

  • Have we seen peak demand for vehicles?
  • How will the trend towards longer vehicle loan terms impact the market?
  • Will we see spiraling incentives if demand weakens?
  • Will fuel prices remain low and the demand for more pro table SUVs and CUVs continue unabated?
  • How will the Trump Administration’s pro-business, limited-regulation and potentially anti-trade policies impact the industry?
  • Will the supply chain be impacted by possible changes to the North American Free Trade Agreement?
  • And, of course, how will the continuing transformation of mobility as a product to mobility as a service – and the emergence of non-traditional players – impact our industry?

While nobody really knows for sure what the answer to these questions are, there seem to be some key principals that bode well for Michigan’s most important industry.

Michigan-based mobility companies, both at the original equipment and supplier levels, have not forgotten the hard lessons of the Great Recession. This is evident in their cautious deployment of capital and far more restrained use of debt. Break-even points have been lowered substantially and there is a far greater focus on profitability as opposed to market share. OEMs have been far from sentimental in axing unprofitable legacy nameplates and brands. Suppliers and OEMs alike have resisted major capital investments in production facilities for fear of having underutilized capacity even though they have struggled to meet historic levels of demand.

While no one saw the fuel price spike of 2007 coming, with ample yet dormant shale reserves in the United States, and a strongly pro-energy president coming into office, it seems unlikely that America will experience some kind of fuel crisis or price spike. This is good for consumers, good for the economy, and therefore, good for the automotive industry, which stand ready to meet the demand for high-riding, flexible yet fuel-efficient crossovers and utilities.

On the cautionary side, however, remains concerns over ever-lengthening loan terms. Also, the growing use of incentives is troubling several analysts. Fall 2016 vehicle sales were trending below 2015’s record levels, only to see an exceptionally strong November that was driven by a surprising growth in incentives.

But perhaps the best news of all for the immediate and long-term future is the posture of Michigan’s mobility companies regarding product. As recently as a decade ago criticism that U.S.-based companies were not always producing world-beating products was not far off the mark. But today, these companies have gone from “zero to hero” in record time. Just look at any automotive “best” list and you will see that American brands, and products produced in America, are earning more than their fair share of accolades.

Our Michigan-based companies have made this  region the most active and concentrated place for next-generation mobility research, testing and deployment. No place on the planet can compare. We have the advantage going into the future. Our friends in Silicon Valley have recognized this and have started to establish a presence in Michigan, just as our companies have done the same in the Valley.

It is certainly an exciting time in Michigan and for the industry we love. Michigan’s challenge is unique. We have to take the lead in creating world-beating products today and tomorrow, while preparing for the most revolutionary change in the industry since its creation over a century ago. Fundamental change is in the air, including a very different president. It is certainly a great time to be associated with Michigan and the automotive industry – and I am equally certain that all of us associated with the industry will indeed earn our paychecks.

Sandy K. Baruah is the president and CEO of the Detroit Regional Chamber.

Planet M: Orbiting Michigan’s Mobility Future

Michigan gets aggressive in mobility space 

By Tom Walsh 

In a world gone manic over myriad mobility options, can the Motor City and its home state still be the epicenter of technology and innovation in cars, trucks and other transit modes? It is a big question that is critical to Michigan’s economic future.

To address it, there is an all-out offensive taking shape to make the case that the Detroit region has the right stuff — assets, talent, policies, resolve — to maintain, and even enhance, its status as a global mobility hub.

“No place else in the U.S. has anywhere near the testing and research assets we have,” said Glenn Stevens, executive director of MICHauto at the Detroit Regional Chamber.

Michigan led the nation in connected vehicle projects in 2015 with 49. California came in second with 35. Along with MICHauto and Michigan’s top research universities and state agencies, Business Leaders for Michigan (BLM) launched the Michigan Mobility Initiative in 2015.

San Francisco-based Uber plans to open a research facility in metro Detroit to work with auto suppliers on autonomous car technology.

Michigan led the nation in connected vehicle projects in 2015 with 49. California came in second with 35. Along with MICHauto and Michigan’s top research universities and state agencies, Business Leaders for Michigan (BLM) launched the Michigan Mobility Initiative in 2015.

“There’s a lot more work in front of us,” said BLM president Doug Rothwell. “But I feel as good about this as I do about anything right now.”

In mid-2016, Initiative partners launched “Planet M,” a new branding campaign announced by Gov. Rick Snyder at the 2016 Mackinac Policy Conference to tout the state’s engineering talent. Its tagline: “Michigan. Where big ideas in mobility are born.”

Planet M aims to dispel not only Detroit’s old “rust belt” image, but also the perception of Michigan’s own young people and parents, from a 2014 survey by Intellitrends, that the auto industry does not offer good growth prospects.

“That’s changing,” said Tim Yerdon, auto supplier Visteon’s global director of marketing and communications, who also chairs the MICHauto talent committee. “Right now, auto tech is cool again. In 2008-09, it wasn’t. People were running away. Now they’re running back to it.”

As part of the Planet M effort, MICHauto is commissioning another perception study of young people. Another plus for the state’s image could be the recent overwhelming passage in the Michigan Legislature of bills that allow for testing of driverless vehicles on roadways.

Planet M launched in mid-2016 as a new branding campaign to tout the state's engineering talent and mobility assets.

Planet M launched in mid-2016 as a new branding campaign to tout the state’s engineering talent and mobility assets.

“I’ve been contacted by three other states asking if I could send copies of our draft legislation,” said Kirk Steudle, head of the Michigan Department of Transportation. “We’re influencing the public policy debate across the country, giving an alternative to the California model, which is very overly regulated.”

However promising Michigan’s offensive on the mobility front may sound, new twists are likely looming over the horizon.

Just look back to eight years ago, amid a turbulent transition from one U.S. president to another. Michigan’s signature automotive industry was on the verge of collapse.

General Motors and Chrysler were on life support, sustained by federal cash infusions approved by outgoing President George W. Bush. Soon they would be pushed into Chapter 11 bankruptcies by President Obama. Things looked dire at the time.

What transpired instead was a surprisingly speedy revival. “Michigan-based auto companies went from zero to hero’ in record time,” noted Detroit Regional Chamber President Sandy Baruah, who served under President Bush during the crisis.

While the comeback numbers were impressive, threats to the traditional auto industry business model and especially to Detroit’s place of prominence as a global hub of automotive innovation would soon be apparent. New innovators were sprouting far away from Michigan, including:

Tesla Motors produced its first low volume roadster in 2008, then showed its first prototype of an all-electric Model S in 2009. It opened a huge “gigafactory” to make lithium-ion batteries in Nevada earlier this year.

Google launched a self-driving car project in 2009 in California, later partnered quietly with Livonia-based Roush Enterprises to build prototype cars a few years later, and recently announced a partnership with FCA to develop self-driving minivans.

Uber Technologies, founded in 2009 as a ride-sharing app called UberCab, teamed up last year with Carnegie Mellon University in Pittsburgh on self-driving car research. And now San Francisco based Uber is planning a research center in metro Detroit to work with auto suppliers on autonomous car technologies.

No telling what turns may lie ahead.

Uber is planning to open a research center in metro Detroit to develop autonomous car technologies

Uber is planning to open a research center in metro Detroit to develop autonomous car technologies.

In June, Detroit came up empty in the $40 million Smart City Challenge created by the Obama administration to link self-driving cars with sensors and other technologies in a city’s transportation network. Columbus, Ohio was the winner. Detroit wasn’t even among the seven finalists.

While Detroit may have valid reasons for being an “also-ran” in the Smart City Challenge, it goes to show that there are plenty of eager, aggressive cities that covet some of the leadership cachet that Detroit and Michigan have enjoyed as America’s automotive capital for so long.

Steudle put the mobility race this way: “While we’ve been moving quite aggressively in Michigan on these mobility issues, they’re moving quite aggressively in California, and in Florida and in Texas,” he said. “We really have to keep our foot on the gas.”

Tom Walsh is a former columnist for the Detroit Free Press.

Detroit Regional Chamber Joins Coalition to Focus on Equity and Excellence in Michigan’s Every Student Succeeds Act Plan

The Detroit Regional Chamber joins the Michigan Students Achieve Coalition to ensure Michigan’s Every Student Succeeds Act (ESSA) plan, focuses on academic excellence for all students. The Coalition, announced last week, will provide recommendations to the ESSA plan, being prepared by the Michigan Department of Education and is expected to be completed in the spring. The plan will be used to comply with the new federal education law, passed in 2015, which replaced the No Child Left Behind Act and focuses on the opportunity and responsibility for improving outcomes, accountability for all groups of students and improvement actions on the state and local school districts. The other coalition members include: Black Family Development, Detroit Branch NAACP, Education Trust-Midwest, Grand Rapids Area Chamber of Commerce, Grand Rapids Urban League, Michigan Alliance for Special Education, Michigan Association of United Ways, Michigan College Access Network, Michigan State Branch NAACP and the Student Advocacy Center of Michigan.

“It’s no secret that not enough of our students are adequately prepared for life after high school,” said Sandy Baruah, president and CEO of The Detroit Regional Chamber. “The success of our region, depends on the success of our talent. It is critical that Michigan’s ESSA plan prioritizes equal access and opportunity for all students.”

Learn more about ESSA and the Coalition’s recommendations.

 

Detroit Promise Expands Tuition-Free Program to Four-Year Universities

Yesterday, on Nov. 28, the Detroit Regional Chamber joined with Gov. Rick Snyder and Detroit Mayor Mike Duggan to announce the expansion of the Detroit Promise college scholarship program to include free tuition for eligible students at four-year educational institutions.

Launched in 2013, the program grew out of a collaborative effort between the Chamber, Gov. Snyder and the Michigan Education Excellence Foundation (MEEF). MEEF raises the funds for the scholarship and the Chamber partners with the schools and students to administer the program. In the past three years, nearly 2,000 Detroit high school graduates have had the opportunity to attend community college, tuition-free.

Earlier this year, Mayor Duggan launched the Detroit Promise Zone Authority that would permanently dedicate a portion of tax dollars to fund the two-year scholarships. This partnership, along with the partnerships from participating universities, allowed the program to expand to allow students that live in and attend high school in Detroit the opportunity to earn a bachelor’s degree from a four-year university. The expansion has been introduced as a pilot program for two cohorts of four-year students that began this fall and will include a second cohort that starts next fall. The four-year scholarships will be paid with funds raised by the MEEF, which has launched a campaign in hopes of raising $25 million over the next seven years.

In the current academic year, more than 700 students are attending two-year or four-year colleges through “last-dollar” scholarships, which cover tuition and other mandatory fees not covered by federal or state grant sources.

“In order for Detroit to compete and win in the 21st century global economy, the city needs world-class talent” said Sandy Baruah, president and CEO of the Detroit Regional Chamber. “We’re pleased to partner with Gov. Snyder, Mayor Duggan, education partners and the funders to fulfill the Detroit Promise, and see post-secondary degrees increase in the city of Detroit.”

For more information on eligibility and instructions on how to register, please visit the Detroit Promise website.

New Destination Detroit Video Showcases Regional Collaboration

Destination Detroit is North America’s premier regional business attraction team. The regional initiative brings together all the resources of one of America’s fastest growing locations. Learn more about Destination Detroit by watching the video below:

Led by the Detroit Regional Chamber, Destination Detroit is operated in partnership with the region’s principal economic development agencies:

Partners

 

Statement from Detroit Regional Chamber on RTA Ballot Results

DETROIT, November 9, 2016 – Detroit Regional Chamber President and CEO Sandy Baruah issued the following statement on the failing of the Regional Transit Authority of Southeast Michigan millage.

“To say we’re disappointed is an understatement. However, we respect the will of the voters and will continue to seek solutions to connect our region and provide mobility to those without access to personal vehicles.”

About the Detroit Regional Chamber

Serving the business community for more than 100 years, the Detroit Regional Chamber is one of the oldest, largest and most respected chambers of commerce in the country. The Chamber’s mission of powering the economy for Southeast Michigan is carried out through economic development, education reform, regional collaboration and providing valuable benefits to members. For more information, please visit detroitchamber.com.

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Jeb Bush Talks Education, Immigration Reform During Opening Conference Keynote

In addressing an issue that often trascends traditional partisan divides, Governor Jeb Bush suggested the American education system is the biggest challenge the country and its workforce face. Bush, president of Jeb Bush and Associates and former Governor of Florida (1999-2007), also highlighted some of the lessons to be learned from Detroit’s revitalization during the first keynote address of the 2013 Conference following and introduction by Detroit Regional Chamber President and CEO Sandy K. Baruah.

Gov. Bush talked about the American dream, the opportunities for success and what he calls “the right to rise.” He went on to say that those opportunities and that ability to rise is dependent on access to a quality education, and said the U.S. is not rising to the challenge. He said America is failing to confront one of the greatest social issues of our time.

“We can’t accept failure for a wide swath of kids under the guise of compassion,” Gov. Bush said. “…Education done right is the only government program I’m aware of that is a cure for poverty.”

Gov. Bush stressed the importance of educational standards, teacher compensation and the disservice of advancing students based on social rather than academic motivations. He said one of the country’s greatest mistakes is its underestimation of the capacity of its children to learn and by doing so, rob them of their right to rise.

Gov. Bush also discussed the importance of narrowing family-based immigration law and highlighted the vital role immigrants play in the U.S. economy. He went on to say that much of Michigan’s success is due to quality leadership and indicated that Detroit will succeed as Michigan has by applying the same strategies the Governor has put in place.

Following his remarks, Bush was joined on stage by Daniel Howes, business columnist and associate business editor for The Detroit News, for a question-and-answer session. This session was sponsored by Meijer.

Governor Snyder Opens 2013 Mackinac Policy Conference

“Credit doesn’t matter. Solving the problem is what matters,” said Governor Rick Snyder as he kicked off the 2013 Mackinac Policy Conference this afternoon. Gov. Snyder took the stage to address Michigan’s path forward in relation to the Conference pillars of education, cultural change and the 21st century global market following an introduction by Chamber President and CEO Sandy K. Baruah and 2013 Conference Chair and the Chairman, President and CEO of ITC Holdings Corp., Joseph Welch.

Snyder opened the Conference discussion by focusing on his strategy to follow through on each of the Conference pillars and their impact on all Michiganders, beginning with Michigan’s role in the 21st century global market. He stressed the fact that Michigan should take a step back, look at what made it great and focus on the importance of engaging in business outside of state borders and globally. He also pointed to innovative ideas as a crucial global commodity.

In looking at education and its role in Michigan’s future, Gov. Snyder pointed to the advantage of having speakers like Gov. Jeb Bush participating in the Conference. He stressed his focus on lifelong and early childhood education as well as the need to move away from the silos of education levels. And to close his remarks, Gov. Snyder discussed cultural change as one of the toughest issues he faced when running for office. He said Michigan has become too divisive and focused on the old ways of doing business. He reiterated his mantra of relentless positive action by pointing out the need for a positive, forward-looking and inclusive cultural environment.

“Let’s have a great discussion, but then let’s spread the word,” said Gov. Snyder. “It’s about all of us being ambassadors to succeed.”

He is also scheduled to give a keynote address to attendees on Friday at 11 a.m.

Tom Walsh: New bridge is an opportunity region can’t waste

By Tom Walsh

From the Detroit Free Press

April 14, 2013

Now that President Barack Obama and the U.S. State Department have officially chosen to accept Canada’s gift of a free bridge at the Detroit-Windsor border crossing by issuing a permit for the project, Michigan’s obligation is to put it to good use.

That’s not a given in a state that has squandered or underutilized assets in the past. More on that later.

First, we can celebrate the green light given to the New International Trade Crossing (NITC) for what it is — a symbol of a region looking forward, investing in growth.

“For those of us who are in the economic development business, it gives us something to sell. We now will have a visible symbol and an actual tool to make it a lot easier to attract companies that are involved in international trade,” said Sandy Baruah, president and CEO of the Detroit Regional Chamber.

David Egner, head of the New Economy Initiative for Southeastern Michigan, said research has shown that Michigan could create a series of logistics hubs that would yield 66,000 new jobs — partly by capturing business that now flows through congested Chicago — but only if a new border crossing provides capacity to handle more traffic.

“It could change the game, including for the west side of the state,” Egner said. “This is a perfect east-west partnership, because today if manufacturers on the west side ship through Chicago, it sits for three days before it moves.”

While border crossing data show that Ambassador Bridge traffic has not fully recovered from the slump after the Sept. 11, 2001, terrorist attacks, the NITC project suggests a brighter future, a region on the move.

“The past trajectory of the bridge traffic has mirrored the trajectory of the Big Three automakers,” Baruah said. “As we see their sales start to spike, their challenge is that if the capacity of the bridge between the U.S. and Canada is constrained, then where are they going to add future capacity to build their cars, now that their trajectory is higher?”

The near-term stimulus of construction jobs is important, too. “This bridge is going to take years to build and will probably have, at various times, tens of thousands of people working on it,” Baruah said. “Even though those are short-term jobs, they feed a narrative of good things happening in Michigan.”

When I asked Gov. Rick Snyder on Friday whether Ambassador Bridge owner Manuel (Matty) Moroun might now be ready to drop efforts to block the NITC project, Snyder said he hasn’t seen any such signals yet, but he is open to discussion on how the public and private bridges could coexist.

“You hope at some point that people recognize this project’s going to move forward because it’s for the benefit of Michiganders,” Snyder said. “I’m always open, and I hope the Canadians are open to sitting down to talk. This is one of those milestones that hopefully reinforces the fact that this project should happen and will happen.”

Whatever tack Moroun takes with the existing bridge, it’s crucial that Michigan’s business and civic leaders hunker down seriously to maximize the benefits of the NITC by laying the groundwork for new industries and for expanding existing businesses.

A classic example of failing to capitalize on a major asset has been the region’s lackluster effort to take advantage of the outstanding McNamara Terminal and other upgrades at Detroit Metro Airport.

It has been 11 years now since the 122-gate, $1.2-billion McNamara Terminal opened, winning raves from travelers and the news media alike. But once visitors leave Metro Airport’s baggage claim area, they are peeved to discover they must fork over $70 for a ride to a downtown Detroit business hotel, or nearly $90 to get to Birmingham.

How can a region that’s serious about business and growth put up with the lack of even a mediocre system of shuttles to get people from the airport to major lodging and conference spots in the region? Thankfully, the Metro Detroit Convention & Visitors Bureau is working on a proposal to improve airport transit. Let’s hope they come up with something workable — and soon.

Meanwhile, we should look at the new bridge the same way we look at the airport: It’s a tremendous potential asset, but it must leveraged.

Just as there’s been much talk about the growth potential of an Aerotropolis development area between Metro and Willow Run airports, there has also been much talk of maximizing the busy border crossing to attract more logistics and freight business.

“There are bunches of plans on paper, but nothing that’s been done in an aggregated manner that makes sense and that the state has embraced,” Egner said.

By the time shovels are in the ground for NITC construction, let’s hope there’s movement on how best to take advantage of it.

Contact Tom Walsh: 313-223-4430 or twalsh@freepress.com