“Can you really imagine a small, relatively low-priced BMW? To make it work, everything has to be exactly right, exactly in the right place, and with a bit of brio thrown in,” said James Womack. Panke, sitting forward in the August 2002 interview, thinks he can get it right, even at a low price. “A BMW is a BMW,” Panke said. It has specific driving characteristics. A specific road feel. A way of handling that is nothing like that of any other car. If Honda owners—or Toyota owners or Buick owners, for that matter—are not already customers for BMW cars, it isn’t likely that they can be lured in on price alone. They have to have the aptitude for BMW’s cars before they walk into the showroom.
Brauer, for one, sees some wisdom in BMW’s approach. With gasoline prices approaching $2 a gallon across the country in 2003, and $3 at some stations in California, there might be an interest in a smaller BMW, without the gas-guzzling habits of its bigger siblings. It made sense for German, Japanese and Korean companies to expand their lineups, he said, because it was clear that Detroit’s rush to light trucks had left it vulnerable to its competition. “BMW is still a relatively small, family-owned company, and the family obviously still loves cars and wants to either do it right or not do it at all,” Brauer said. “As long as they retain that philosophy and continue to offer solid vehicles in terms of style, interiors and driving pleasure, they will continue to be successful.” Womack, however, offers an opposing view. “Don’t you eventually start selling cars to folks with no dough and no class that the aspiring don’t want to be associated with? I’d be very careful.”
For his part, Joe Hammell, the Atlanta 5-series owner, isn’t fazed by the prospect of a cheaper Bimmer. He doesn’t want to drive anything else, particularly what GM and Ford have to offer. “There’s nothing out there from Detroit that we would buy today,” he said. “I have always hoped that there would be an American auto that I would want to buy.” He’s checked out pretty much everything—sat in the latest cars from Cadillac at the Atlanta Auto Show, and driven the Jaguars and Volvos that Ford sells along with Lincolns when he rents cars from Hertz. None sway him away from BMW. Neither does his desire to support the American auto industry. “When given the option to buy the best car for our dollar, the free market in our country has allowed us to have probably the greatest amount of choices in the world,” Hammell said. “We are a patriotic people, but for too long Detroit didn’t keep up with the rest of the world. Maybe as I get older, Cadillac would have something that I or my wife would consider. But right now, I don’t see that happening.”
Which is just what Panke, for one, is glad to hear.
CHAPTER EIGHT
DETROIT SOUTH
IT IS POSSIBLE to drive onto the grounds of Ford’s sprawling Rouge complex in Dearborn, Michigan, and not have a single guard ask why you are there. Not far from the Detroit city limits, the Rouge was the centerpiece of automobile and auto parts production for decades during the last century, the furnace that fueled Ford’s engine of commerce. Its towering steel mill and its assembly lines were captured by photographers like Charles Sheeler and artists such as Diego Rivera, turning the 100,000 men and women who once toiled here into iconic images of the might that Detroit displayed. This is where the famed Battle of the Overpass took place, marking the bloody 1930s showdown between organizers of the fledgling United Auto Workers union and thugs hired by Ford to keep them out. Thousands of tourists each year flocked to gape from catwalks at the open furnaces and assembly lines beneath their feet.
There is still production going on here at the Rouge, of steel and parts and cars, and in 2003 Ford proudly renovated its automobile plant here to create an environmentally friendly factory with a sprawling roof garden and a new visitors’ center. But for the most part, the Rouge is abandoned now, its empty brick buildings sitting silent, a sad reminder of the economic power that once was housed here. All around the property are smokestacks, some active, most not, reaching up to the sky like fingers gesturing in despair. On a cold winter day, the winds whip around this factory with biting intensity, adding a particular sense of foreboding to the scene. The Rouge is a powerful reminder of what Detroit once looked like and the erosion that the industry has experienced. While many auto factories elsewhere in the city have been closed and torn down, and executives work from gleaming office towers with underground garages and tight security, the Rouge is the American automobile industry’s roots. No matter how Detroit tries to focus on newer factories and production techniques, this is where it came from, and it cannot escape its past.
In Alabama during the winter, a drive west on Interstate 20/59 can be a nerve-racking event for an out-of-towner. Big semi trucks roar by, producing their own brand of wind shear, and there is almost nothing to see except stands of pine trees lining the road. So it’s a surprise when, all of a sudden, the Mercedes-Benz manufacturing operation looms up right next to the interstate just outside Vance. Its buildings are gleaming white. Its assembly plant seems to stretch forever to the horizon. Next door, a modern, glass-walled visitors’ center sits glittering under the night sky. Atop the building is a replica of the famous Mercedes three-pointed star, slowly revolving, unmistakable even by drivers who are zipping by apace with the truckers. It is a smaller version of the daunting Mercedes logo that revolves day and night atop the company’s headquarters in Mohringen, Germany, just outside Stuttgart. That one serves as a beacon for pilots landing at the Stuttgart airport across the roadway there. This one serves to put the world on notice that Mercedes picked Alabama, as unlike Detroit as a place could be, as the site of its $300 million factory. It is impossible to miss either this factory or the emergence of Alabama as a key player in the new American automobile industry, what many call “Detroit South.”
When import auto companies first built their plants in the United States, they stayed surprisingly close to where Detroit companies had located their factories. It is one of the biggest frustrations of the United Auto Workers union that it has been unable to organize workers at a single one of these “transplant” factories, even though in some cases the facilities are right in GM, Ford and Chrysler’s backyard. Toyota’s plant in Georgetown is just 15 miles from Ford’s big truck plant in Louisville, while GM’s Bowling Green plant, home to the Corvette, is not far away. Honda’s plants in Marysville and East Liberty, Ohio, have GM, Ford and Chrysler plants within a few hours’ drive. There are a number of Big Three factories in Indiana, home to the Toyota plant in Princeton. And Nissan’s plant in Smyrna, Tennessee, which was the farthest south of the first round of factories, sits only an hour from the Saturn plant in Spring Hill, where workers are UAW members working under a special contract. Though the UAW has accused the employers of preselecting workers who were anti-union, or intimidating those who tried to organize the plants, it can’t blame those factories’ location for the fact that it hasn’t convinced them to join up.
It’s a different story with the second wave of factories, beginning with BMW in South Carolina and continuing even deeper into the South, with Mercedes and other companies picking up the charge. These are right-to-work states, and even UAW officials acknowledge that their message is a tough sell, legally and culturally. Still, it would be one thing if these plants were small and their impact on their communities a modest thing. But the plants have had the effect of changing the landscape in the Deep South, literally and figuratively. The impact has been greatest in Alabama, where, given the state’s history, no one could have predicted what has transpired there in the past 10 years.
Inside a packed auditorium at the Civil Rights Institute, on the outskirts of downtown Birmingham, Alabama, visitors sit quietly, watching a slide show that serves as an introduction to the city’s history. Black-and-white photographs depict how Birmingham’s population exploded after the Civil War to rival that of Atlanta, two and a half hours to the east. The steel industry provided profits for city fathers and jobs for the city’s burgeoning black community, which by the turn of the century made up one-third of the city’s
population. The smell of sulfur was the smell of success, and the steel and textile mills that also mushroomed around Birmingham helped the city prosper. Birmingham became known as the Magic City and, alternatively, the City of Churches, for the 700 different houses of worship within its city limits. But none of this could camouflage the fact that Birmingham was the most segregated city in the South. Strict lines, both legal and by custom, were drawn between its white and black populations. The Ku Klux Klan was a constant and brutal presence, lynching and terrorizing those who it felt needed to be taught a lesson. As the slide show ends, visitors are given a stark reminder of just what Birmingham had become best known for. The screen rises into the ceiling to reveal the entrance to the museum’s comprehensive exhibits on the black community’s struggle for equal rights. There, in front of the group, stand two water fountains: one, in pristine working condition, labeled for Whites, the other, broken and rusty, for Coloreds.
The sight prompts gasps and murmurs from those who have seen such things only in books, and it brings tears to the eyes of those who were alive when this was the norm in Birmingham. For segregation remained in force here until well into the 1960s, despite presidential decrees, the brave efforts of the Freedom Riders, countless demonstrations in the park that sits just across from the redbrick institute, and above all, the struggles of the late Dr. Martin Luther King, Jr., whose Birmingham jail cell is replicated here, and whose “I Have a Dream” speech plays on a continuous loop in a room devoted to his historic address in Washington, D.C. Even after integration eventually took hold and the barriers came down, a number of people here feared that Birmingham would be forever restrained by its past and unable to play a role in the resurgent South. But finally, 50 years after the Supreme Court’s ruling in the Brown vs. Board of Education case, Birmingham has managed to rise above those roots in a fashion that leaders of the civil rights movement might never have envisioned. And it owes its renaissance largely to automobiles.
Today, Birmingham has become the de facto capital for a growing number of car manufacturers, parts suppliers and other businesses that flocked to the Deep South during the late 1990s and early this decade. Birmingham’s small airport, easy to negotiate, bustles with arriving executives from Japan, Germany and Korea, engineers laden with schematics and designers toting portfolios. Manufacturers are taking full advantage of a southern workforce eager for the kind of well-paying, challenging jobs that these companies offer, and local and state officials willing to offer packages of incentives to win their investments. Given how grateful any state would be to secure just one automobile plant, Alabama’s success has been truly astounding. Of the five automobile assembly plants that were up for grabs in recent years, Alabama landed three, along with an engine plant built by Toyota. Since 1993, when Mercedes announced it would build its plant in Vance, 35 miles west of Birmingham, Alabama’s automobile industry has swelled to include 19,500 people directly employed by the various auto factories, including the Honda plant in Lincoln, 20 miles east of Birmingham, and the Toyota engine plant in Huntsville, directly north. More jobs will be added when the Hyundai plant, under construction to the south, in Montgomery, opens in 2005. Collectively, the state’s automotive employers have an annual payroll of $3 billion. Another 33,800 people work at automotive components and other companies tied to the industry, while 96,200 jobs have been derived indirectly, from hotels, restaurants and other businesses that have sprung up as a result of the investments. There is a spillover effect, too, because one of the plants Alabama missed out on, a Nissan truck plant, sits only three hours to the west, in Canton, Mississippi, which means some companies based in Alabama and some based in Tennessee are serving both states. And Alabama officials believe the wave of investment is far from over. They predict that at least three more automobile factories, possibly from Japan’s Mitsubishi and Korea’s Kia, plus another Toyota plant, will be up for grabs in the next few years. If Alabama’s officials have anything to say about it, at least one if not more of them will end up in the state.
Alabama’s position as the home of Detroit South is a sharp contrast to its dilemma of only 20 years ago, when its economy was deteriorating and its unemployment rate was skyrocketing. The steel and textile mills that had fueled the state’s growth were closing, and the state’s agriculture and timber industries were hardly strong enough to take up the slack. Even though Alabama was a right-to-work state, with some of the lowest average wages in the country, it had to plead with manufacturers to keep their business. In 1982, General Motors threatened to shut one of the plants in its Harrison Radiator division that sat outside Tuscaloosa. The factory was losing $1.5 million a year, executives at the company told a visiting delegation of state officials who flew to Detroit in an effort to save the factory. As a result, GM had no future product to put in the factory, spelling its inevitable doom. But the state refused to let GM proceed without a fight. Malcolm Portera, now the chancellor of the state university system, was then a business professor at the University of Alabama. Asked by the state’s governor for advice, Portera proposed that Alabama be allowed to suggest ways to help the plant save money and figure out a product that could be built there. GM said it could make no promises, but it told the state to make its best case. After analyzing the factory and other manufacturers in the radiator business, Portera managed to find savings of $2.2 million a year, and GM agreed to spare the factory. It remains in operation as part of Delphi Corp., the world’s largest auto parts supplier, which GM spun off in 1999.
The experience convinced state officials that there was a future for manufacturing in Alabama. But they were far from alone, particularly in the South. Neighboring states had the same idea—most notably Tennessee, which managed to snag two of the most heavily sought-after factories of the 1980s, the Nissan factory in Smyrna and, in one of the most publicized incentive battles in industry history, the Saturn plant in Spring Hill, outside Nashville. Alabama officials had been among more than 4,000 state, city and community leaders who had descended on GM chief executive Roger B. Smith in his office in the GM Building in Detroit in an effort to win the factory, each promising all manner of special tax breaks, road improvements and other deals. The deals actually had little bearing on GM’s decision. GM liked the Spring Hill area for its land and its central location. All the efforts to woo the company had been flattering but completely unnecessary, as it turned out. But the decisions by GM and Nissan to go to Tennessee made Alabama’s movers and shakers even more determined to win the state an automobile factory. There was another prize to be had, and this one would ultimately begin Alabama’s journey to automotive leadership.
Almost nothing of importance happens in Alabama without the knowledge and involvement of David Bronner. He good-naturedly bristles at suggestions that he is Alabama’s version of Don Corleone, but it’s in the best interests of anybody planning to do business in the state to drive down to Montgomery, the state’s capital, and pay him their respects. And plenty of important people have, including Nissan’s Carlos Ghosn, who walked the streets of Montgomery with Bronner one evening, puffing on cigars, and DaimlerChrysler chief executive Juergen Schrempp, who flew in from Stuttgart to lounge on one of Bronner’s office couches and talk about cars. Bronner, 53, is a cheerful man with twinkling eyes and reddish blond hair who surprisingly is not a southerner but hails from Minnesota. He holds court in a memorabilia-lined office at one of the buildings in Montgomery that is owned by the Retirement Systems of Alabama, the $25 billion pension fund that he has run for 25 years. The buildings built by the RSA are easy to spot in this otherwise easygoing southern city, the state’s capital. The RSA buildings are skyscrapers built with green roofs, standing straight at attention like soldiers amid the historic antebellum structures.
These days, Bronner is best known as the chief investor in US Airways, the nation’s seventh-largest airline, which he rescued from bankruptcy in 2003 with a relatively minor investment of $240 million. That deal gave him 70 percent voting control of the
airline, the chairmanship and the right to select eight of the airline’s 15 board seats. When unions balked at granting the concessions the airline said it needed to stay afloat, Bronner threatened to withdraw his investment and force the airline into liquidation. “What’s their alternative? We’ll Chapter 7 it, and it will be gone,” he said. The unions buckled under not long after, and Bronner’s place in airline history was cemented. But years before his investment in US Airways, Bronner—“Doc” to his friends, in joshing reference to his Ph.D.—played a direct role in bringing both the Mercedes and Hyundai factories to Alabama, drawing on the assets of his pension fund to help clinch the deals.
Alabama’s efforts to land a major automobile manufacturing plant actually began in Detroit, at the 1988 auto show. State development officials had gone up to see the new cars and trucks, and to visit auto industry leaders. In the course of their conversations, they got wind of rumors that Daimler-Benz, which owned Mercedes, was investigating a “North American project.” Taking that to mean a car plant, the development staffers began a search for someone who could help them get a foot in the door. For years the quest seemed fruitless, until, in December 1992, they made contact with a German lobbyist in Washington, D.C. The lobbyist said he would take some information home with him over Christmas and deliver it to Daimler’s headquarters. The development office whipped together a booklet, in English and badly translated German, with red and black covers, providing data about Alabama and photos of the state. A few weeks later, the state had a new governor, Jim Folsom, and a new development director, Billy Joe Camp, both of whom sat up in excitement when they were briefed on the possibility of landing a Mercedes plant.
The End of Detroit Page 21