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Detroit on the road to recovery as police chief urges citizens to buy a gun

Detroit has suffered as a result of the 2008 financial crisis.
Joshua Dowling
CarsGuide

11 Jan 2015 • 11 min read

Detroit is a shadow of its former glory. The recovery has started after exiting bankruptcy last month, but derelict buildings remain and the city has the highest crime rate in the US.

Downtown Detroit looks like the back lot of a movie studio. Among the occupied buildings, skyscrapers built in the halcyon days are now completely gutted. You can see straight through them to the next block.

On the fringes of the city, family homes sit alongside abandoned buildings.

There are glimpses of redevelopment as Motor City emerged from bankruptcy last month, but the green shoots are still few and far between.

Detroit's population of 700,000 today is less than half what it was in happier times, the beginning of the automotive boom in the 1960s.

In the middle of winter, where temperatures dip to an average of minus 6 degrees Celsius, knee-deep snow covers the footpaths and shopfronts. Only half the city's street lights are actually working.

The Detroit police chief, James Craig, dubbed by local media as "Hollywood" for his enthusiasm to get in front of a camera, has been encouraging Detroiters for a year now to buy a gun to defend themselves. Chances are, he admits, police may not be able to respond in time because they are working with skeleton staff numbers.

The birthplace of the US car industry has been through hell and back

While the number of people murdered in Detroit dropped to between 316 and 333 in 2013 (the latest FBI and Detroit Police figures vary) it amounts to almost one homicide per day.

Depending on which figures you use, Detroit's homicide rate equated to 47.5 per 100,000 residents in 2013, down from 55 the year before, but it still has the highest murder rate of any US city at 10 times the national average.

There were a further 1161 non-fatal shootings in the city over the same period.

Which could explain why the number of residents with a concealed weapon has increased, and several intruders and would-be robbers have been shot or killed by their victims in the past year.

"I'm not an advocate for violence, but I am an advocate for, when faced with a dangerous situation – one that offers or presents an imminent threat to life or a threat of great bodily harm – that one protect themselves," the Detroit police chief told media last January, before his appearance on the cover of the National Rifle Association's magazine in June 2014.

"A law abiding citizen who has a (permit for a concealed weapon)...they're not going to tell an armed suspect 'stop for a moment, I need to dial 911 so I can get a police officer here'. Suspects know that if they make a poor decision to engage in a violent crime they could encounter an armed citizen."

Police figures show there were almost 13,000 burglaries in approximately 250,000 dwellings in Detroit last year, giving locals a 1 in 20 chance of finding an intruder in their homes.

It's perhaps no coincidence that, in Detroit and its surrounding areas, there is one permit for a concealed pistol for every 21 households, figures from 2014 show.

The birthplace of the US car industry (Henry Ford put the world on wheels in 1908 by making motoring affordable for the masses, but the automobile was invented in Germany in 1886) has been through hell and back over the past five years.

The Bush administration injected $25 billion to prop up General Motors and Chrysler in late 2008, and when Barrack Obama was elected in 2009 he eventually stumped up a further $57 billion once it became clear two of the Big Three US car makers were on the brink of collapse, and could bring the rest of the manufacturing industry down with them.

Ford didn't take one cent of bailout funds. Although they did not foresee the severity of the credit crunch, Ford's finance executives began to see credit drying up about two years before the Global Financial Crisis took hold, and so in late 2006 decided to borrow as much money as they could to completely restructure the company.

William Clay Ford hired former Boeing executive Alan Mulally to turn the company around, and persuaded the board and the Ford family to back the bold plan.

Without realising what a deft move it would turn out to be, Ford shut 17 factories, sacked 51,000 workers and sold off Ford's loss-making European brands Jaguar, Land Rover, Volvo and Aston Martin just months before the GFC hit in late 2008.

Ford had put its buildings, design patents, and the rights to the famous blue oval badge up as collateral – and borrowed a staggering $23.6 billion to invest in a complete overhaul of the company and its entire line-up of cars.

At the time GM and Chrysler executives privately scoffed at Ford's huge loan, but two years later their ailing companies would need to be bailed out by US taxpayers.

While Detroit's car makers were enduring their own battles, the city around them was crumbling. In July 2013 Detroit was declared bankrupt with $18 billion in debt. It is the largest city in US history to go broke, and to ever get so far in the red.

As people lost jobs and defaulted on mortgage repayments, houses could be bought for as little as $500, or the balance of the property tax debt, typically about $7000.

This created a new dilemma: an increase in the number of homeless. One of the downsides of buying a $500 house – as many people found out the hard way – was evicting whoever was living in it. At least half the houses sold in distress were occupied.

In Detroit you were seeing the big companies in big trouble

To raise some cash the city even considered selling off the Detroit Institute of Arts' famous collection, with paintings by Vincent van Gogh and Brueghel. But that was avoided after pension funds and healthcare were cut, and foundations and private individuals made significant donations.

Even the car company executives took a pay cut.

The then boss of General Motors, Rick Wagoner, and the then boss of Chrysler, Robert Nardelli, agreed to earn a wage of $1 per year. Conveniently, this figure did not include bonuses.

It also didn't help that both executives flew to US government bailout hearings in late 2008 on private jets – as the city of Detroit and more than one-third of its citizens were broke or living on the poverty line.

But as of last month the city of Detroit is able to make a fresh start, having emerged from bankruptcy after shedding almost $7 billion of its $18 billion debt.

Michael Simcoe, formerly Holden's chief designer and now head of styling for General Motors in the Asia-Pacific region, saw the crisis up close.

Simcoe was based in Detroit from 2004 to 2010 (as executive director of North American exterior design and global architecture) and lived through the worst of the fallout, and is now witnessing its recovery.

"Things were bad at work but they were worse in the neighbourhood," said Simcoe. "Many of the parents that my kids went to school with lost their jobs, and a lot of houses were left vacant, building had stopped, the world stopped for a while."

Simcoe had lived through a previous US recession during an earlier posting in Detroit from 1990 to 1992, but he described that one as merely "a dip".

"Nothing in my lifetime has ever come close to being as pervasive as this," said Simcoe.

He said most Australians have no idea just how much trouble the rest of the world was in during the peak of the GFC. Australia survived largely unscathed thanks to the mining boom and a $60 billion future fund held by the Federal Government.

"I don't think anyone in Australia recognised how deep the whole thing was globally," said Simcoe. "Personally, a little bit of the hardship that Detroit and other countries experienced might have been a nice lesson for Australia. It feels like a very privileged place at the moment. That's what I noticed most when I moved back to Australia (in 2011), it didn't feel like anyone had any idea how lucky they were."

Simcoe said the social and economic impact in the US "was happening all over the country but in Detroit you were seeing the big companies in big trouble".

Although the GFC was not Detroit's fault, it was one of the most vulnerable industries to be impacted once it started to take hold in 2009.

The recovery is only just beginning

For a record eight years in a row, from 1999 to 2006, Americans bought an average of 17.3 million new cars annually. The industry was riding a wave and was blind to the danger around the corner.

Vehicle sales slumped to 10.6 million in 2010, which hit the car makers with a double whammy. Not only were they in crippling debt, they weren't raising enough cash through vehicle sales because of the market slowdown.

But last year, US car sales returned to their highest levels since 2006 (with 16.5 million deliveries). With the bankruptcy behind it as of last month, Detroit has taken a turn for the better – although the recovery is only just beginning.

Detroit plans to demolish more than 20,000 vacant houses in the coming months. This year, as the city tries to recover $709 million owed by householders, another 62,000 dwellings will be up for auction if owners can't pay their property tax. A move which could leave up to 100,000 people – or 1 in 7 – homeless.

Detroit officials will have to report to a US government financial review board – which has the power to veto spending and borrowing – for the next 10 years to prevent the city slipping back into bankruptcy.

But $1.4 billion has already been allocated for redevelopment and infrastructure.

"You can see clear progress in the restoration of downtown, the entrepreneurs who are flocking here, the massive building projects getting underway and the work being done to improve education, neighbourhoods and city services," Mary Barra, chief executive of General Motors, told Detroit media.

The improvements can even be seen from Australia, says Simcoe.

"Each time I come back here I see it getting better and better," said Simcoe, in Detroit ahead of next week's annual auto show. "I know over the years it's been the butt of jokes for journalists coming to the Detroit motor show. And it's not at its best when you're coming here in the middle of winter. But if you spend any time downtown now you'll recognise how different it is. There are a lot more businesses opening up here, there's more entertainment, people are buying property, there's an obvious commitment to the city."

Beyond the engineering and design talent that the car industry brings, Simcoe says Detroit is "a very creative place, not just in music, but in artistic and other creative ways. It shouldn't be put down the way it is."

US president Barrack Obama visited Detroit this week to visit car factories and tout the success of the bailout packages. All but $9.3 billion of the $82 billion spent to save the car industry has since been paid back. It was only expecting to recover about half the loaned amount.

Detroit is on a path to survive

"The auto industry has led a resurgence of manufacturing in America," President Obama told the Detroit News. "It's been a good deal for America and it saved about a million jobs."

The Washington DC Bureau chief for the Detroit News, David Shepardson, who interviewed President Obama this week, told News Corp Australia: "The biggest issue remains: convincing families that it is safe enough and the schools are good enough to stay in Detroit or move to Detroit".

He said younger people are moving to Detroit in large numbers to live in loft apartments and work in jobs outside the auto industry (just 6 per cent of workers are involved in manufacturing as most car factories now are out of the city and even out of state).

"But the key is getting families to return and find ways to address blighted neighbourhoods," he said.

Despite the doom and gloom, Shepardson believes Detroit is "on a path to survive".

"New restaurants and offices have moved downtown with new restaurants," he says. "But the jury is still out: can the city begin to sustainably grow, fix the schools, get the streetlights back on, get police, fire and ambulance response time back to where it should be, become a functioning city?"