Tag Archives: Detroit

Mayor Dave Bing Says Detroit Has Suffered Under Liberal Leadership – by Gregory Hilton

The most important election on Tuesday for conservatives is not in VA, NJ or NY-23. It is electing Detroit Mayor Dave Bing to a four year term with a City Council that will undo decades of liberal damage. Detroit and Atlanta both saw tremendous white flight in the 1960s and ’70s, and both cities had 70% black populations.
The key difference is that business friendly Atlanta was revitalized with the addition of 1,100 companies from around the world. Low state taxes, right to work laws, and the absence of burdensome regulations led to $70 billion in private investment which generated over 1 million new jobs. Detroit never recovered from the 1967 riots and it became America’s murder capital.
Mayor Bing knows the auto industry did not kill Detroit. It was a City Hall at war with its business community and middle class. Bing wants to follow Atlanta’s example and he serves without a salary. His first targets are the public employee unions and the bloated city bureaucracy. Small business owners have told the Mayor it takes 7 years to acquire all of the permits necessary to open a store in Detroit, and most residents have to head to the suburbs for shopping. The next challenge is a school system with an 80% dropout rate.
Detroit is also our stolen car capitol. Garbage is piled up along the streets as bulk pick ups have been reduced from every month to every 3 months. The city has lost over one million residents and the situation is well beyond blight. Entire neighborhoods have been abandoned. They are now littered with burned houses, stolen cars, graffiti, dope dealing, and rampant prostitution.
Bing has already fired thousands of public employees during his five months on the job. His “turn around team” has 150 recommendations that will help solve the city’s $300 million deficit, and he has already implemented 24 of them. Detroit has not had a Mayor similar to Dave Bing since the 1950s. His election will be a huge setback for the liberal establishment, and a tremendous boost for the long suffering residents of Motown.

The Rust Belt Deathfest by Gregory Hilton

‘Fastest Dying Cities’ Meet for a Lively Talk by Douglas Belkin, Wall Street Journal

Last year, Forbes.com used long-term trends of unemployment, population loss and economic output to devise a list of “America’s Fastest Dying Cities.” The cities include Cleveland, Dayton, Canton and Youngstown, Ohio; Detroit and Flint, MI; Buffalo, Scranton, Springfield, MA and Charleston, WV. They all realize manufacturing is not going to come back to save them.
These cities have natural resources, hardworking people, underutilized infrastructure, and land for expansion, but you can see the decline everywhere and the housing markets and crime are awful. What they also have in common is rejecting the obvious path to a turnaround. All of them are over-taxed and over-regulated with a one party political system which has led to heavy patronage and incompetence in local government. They all have several common denominators. Among them bad local political choices, lack of regional cooperation, and no vision to diversify 20-30 years ago. They are also controlled by unions which promoted policies destroying manufacturing jobs. Decades of anti-business policies have resulted in a migration of good jobs.
The companies that stayed in these cities saw their market share evaporate, as their ability to fend off foreign or non-union competitors waned. Union workforces became increasingly less productive as measured against hourly throughput. Now the laws of economics are holding true. Union leaders horribly failed their membership by not emphasizing productivity.
The leaders of these dying cities are meeting now but their problems have been around for a long time. For example, Detroit never recovered from its 1967 riots. I hope they will look at themselves to come up with an answer but I am skeptical.
This letter was published in Forbes: “I’ve lived in Flint, MI my entire life and I just recently began working at a GM factory. With the exception of a few people my co-workers are the laziest and most negative people I’ve ever seen. From what I’ve heard from the GM workers all my life and what I’ve recently seen first hand, the workers themselves have played NO SMALL PART in what’s happened to the automotive industry here.”
These observations were supported in a letter I received from Norina Mooney of California’s Silicon Valley; “As a member of the SEIU labor union I agree with you. Most union workers are lazy. They are complacent in their jobs but they know they will never be fired. I work for a government agency and I am the exception to the rule. Most workers do not go out of their way to do anything. I makes me so irritated but I guess I was placed there for a reason.”

Pontiac Enters Car Heaven by Gregory Hilton

The 1967 Pontiac GTO was the first muscle car

The 1967 Pontiac GTO was the first muscle car

Pontiac Enters Car Heaven by Gregory Hilton–General Motors made if official today. The Pontiac brand name will cease to exist at the end of next year, and an additional 21,000 employees have been fired. It was also revealed that the number of GM dealers will decline by 42%, and the company is currently negotiating with over 2,600 dealers that are on the chopping block. In addition, 28% of all plants will be closed by the end of next year. The automaker announced the sweeping moves as part of a revised business plan it is submitting to the Treasury Department.
The key elements of the new business plan are not surprising, and they are a result of an astounding 97% fall in GM’s stock value since 2000. When I grew up the world’s largest and most profitable corporation was General Motors. By 1980 they had a staggering 853,000 employees, and the most respected figure in the American business community was the GM chairman. He always led the “Big Three” (GM, Ford and Chrysler), and the sentiments of 1950s CEO Charles Wilson were still accepted, “What’s good for General Motors is good for the country.”
GM was always considered a blue chip stock, but now it is struggling to stay out of bankruptcy, which remains a very real option. A final decision will be made by June 1st and GM’s fate is now in the hands of President Obama’s auto task force. The current reorganization plan would give the U.S. government at least a 50% stake in the automaker, with the union holding up to 39% and bondholders with an additional 10% share. Current shareholders would effectively be wiped out.
The market capitalization of GM is now below Oprah Winfrey’s net worth. Pontiac is not alone among the major changes. Saab has already entered bankruptcy protection and is being separated from GM. Saturn will be phased out in 2012, and this blow is particularly painful because the brand was once seen as GM’s future. Saturn began 19 years ago as an effort to attract owners of small Japanese cars. GM also announced that it plans to sell or close Hummer. For the next year Pontiac will be reduced to a few sporty models, primarily the Solstice and Vibe.
All baby boomers will remember Pontiac’s “wide track” hey day when the brand included GTO, Firebird, Grand Prix, Trans Am, LeMans, Catalina, Tempest, Ventura and Bonneville. Now those models will join Oldsmobile, Plymouth, Packard, Hudson, Nash, Kaiser-Frazer, Duesenberg, Tucker and American Motors in U.S. automobile history. As Pontiac enters car heaven we will thank them for giving the world its first true muscle car (GTO), as well as distinctive styling that will long be remembered.
Pontiac’s greatest moment was the GTO. This car was produced in spite of GM management, not because of it. The GTO was assembled in violation of GM’s corporate rules against putting big block engines in that type of body shell. John DeLorean did it in secret and by the time GM could do anything about it, the car had become too big of a hit for the home office to do anything about it.
GM was the largest U.S. corporation by revenue as recently as 2000. The company had 50% or more of new-car sales for decades, peaking at 55% in 1956. In 2008, that figure fell to less than 22%. Market capitalization peaked at $52 billion in 2000. In February, after GM revealed its survival plans, the figure was $1.33. Toyota’s market cap is now $103.6 billion.
In the late 1960s both Pontiac and GM were at a pinnacle of success. The impact of the Japanese imports would not be relevant in the American market until after the oil shock of 1973. The beginning of the energy crisis was when the GM story became a tale of accelerating irrelevance. The company was also slow to recover from the long UAW strike of 1970, when over 400,000 workers walked off their jobs.
The UAW won, and they would continue to win in show downs with the Big Three. They soon acquired the nick name “Generous Motors” because of the wage and benefits being received by UAW members. The cost of those benefits would bedevil GM for the next 35 years. But they didn’t buy union peace. Rancorous relations and periodic strikes remained a fact of life at GM.
Customer preferences changed, competition tightened, technology made big leaps, and GM was always driving a lap behind. GM has been losing market share in the U.S. since then, destroying capital for years, and returning no share price appreciation to investors.
A “Fortune” magazine cover story about GM in August of 2008 by Alex Taylor (who has written about the company for four decades) concluded with this observation: “If Washington wants to bail out GM, it’s fine with me. A lot of short-term angst will be avoided, and taxpayer money has been spent for worse purposes. But you have to wonder whether the insular, self-absorbed culture that still dominates GM is up to the job of restructuring the company quickly enough to make it profitable and competitive again.
“GM has been on a downward path ever since I began covering it. What is going to make it different this time? As painful as bankruptcy may be, it would give GM the leverage it needs to redo its labor contracts and dealer franchise agreements, downsize the company, recruit new management, and position itself for an economic upturn in 2010 that would enable it to regain some fraction of its former glory.”