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Detroit Economy
 
 
 

Detroit and the surrounding region constitute a major manufacturing centre, most notably as home to the "Big Three” automobile companies, General Motors, Ford and Chrysler. The city is an important centre for global trade with large international law firms having their offices in both Detroit and Windsor. About 80,500 people work in downtown Detroit, comprising 21% of the City's employment.

There are about 4,000 factories in the area. The domestic auto industry is primarily headquartered in Metro Detroit. New vehicle production, sales, and jobs related to automobile use account for one of every 10 jobs in the United States. The area is also an important source of engineering job opportunities. A 2004 Border Transportation Partnership study showed that 150,000 jobs in the Windsor-Detroit region and $13 billion in annual production depend on the City of Detroit's international border crossing.

The Detroit area is accustomed to the economic cycles of the auto industry. A rise in automated manufacturing using robot technology, inexpensive labour in other parts of the world, and increased competition have led to a steady transformation of certain types of manufacturing jobs in the region. Local complications for the city include higher taxes than the nearby suburbs, with many unable to afford the levies on property In June 2008, metropolitan Detroit's unemployment rate was 9.7%. In the city, the unemployment rate was 14.2% at the end of 2005, leaving Detroit with more than one-third of residents below the poverty line. This is in part attributed to white flight following court-ordered busing during the 1970s. Large parts of the city have abandoned and burned out shells of buildings. The city has struggled with finances; it issued bonds in 2008 to provide funding to demolish some blighted properties.

In spite of foreign competition for market share, Detroit's automakers have continued to gain volume from previous decades with the expansion of the American and global automotive markets. In the late 1990s, Detroit's automakers had gained market share and were enjoying record profits until the recession of 2001 and the subsequent September 11 attacks caused a severe decline in the stock market along with a pension and benefit funds crisis. Although retiree health care costs remain a significant issue, General Motors' investment strategy generated a $17.1 billion surplus in 2007 for its $101 billion US pension portfolio, a $35 billion reversal from its $17.8 billion in underfunding. In 1994, with rising demand for sport-utility vehicles and pickup trucks, the industry fought Clinton administration's efforts to implement an across the board Corporate Average Fuel Economy (CAFE) increase. In 2005, the Bush administration asked Congress for the authority to reform the CAFE standard from a single average to six different size based categories in an effort to resolve the issue.

With rising oil prices and war, consumers have chosen to purchase fewer trucks and SUVs. This negatively impacted the profits of Detroit's automakers. As a result, GM and Ford implemented their respective turnaround plans. Concern among analysts over restored profits has fueled economic uncertainty in the metro Detroit area. During the Economic crisis of 2008, President George W. Bush extended loans from the Troubled Assets Relief Program (TARP) funds in order to help the Big three automakers bridge the recession, after final passage of a similar proposal had been blocked by a Republican in the US Senate. The President extended the loans to aid the auto industry's restructuring plans which include a goal to convert long term debt into equity and to make costs competitive.

Initially, GM and Ford had sought to delay the introduction of unprofitable hybrids in favour of the all-fuel cell vehicle; however, with rising gasoline prices and foreign rivals marketing hybrid cars, Detroit's automakers responded. In 2006, Ford announced a dramatic increase in production of its hybrid gas-electric models, Ford and GM have promoted E-85 ethanol capable flexible-fuel vehicles as a viable alternative to gasoline. General Motors has invested heavily in all fuel cell equipped vehicles, Chrysler's focus on biodiesel may boost sales. Two days after the September 11 attacks, GM announced it had developed the world's most powerful fuel cell stack capable of powering large commercial vehicles. In 2002, the state of Michigan established NextEnergy, a non-profit corporation whose purpose is to enable commercialisation of various energy technologies, especially hydrogen fuel cells. Its main complex is located north of Wayne State University.

Firms in the suburbs pursue emerging technologies including biotechnology, nanotechnology, information technology, cognotechnology, and hydrogen fuel cell development. The city of Detroit has made efforts to lure the region's growth companies downtown with advantages such as a wireless Internet zone, business tax incentives, entertainment, an international riverfront, and residential high rises. Thus far, the city has had some success, most notably the addition of Compuware World Headquarters, OnStar, EDS offices at the Renaissance Center, PricewaterhouseCoopers Plaza offices adjacent to Ford Field, and the 2006 completion of Ernst & Young's offices at One Kennedy Square. However, Comerica Bank decided to move its headquarters from Detroit to Dallas in 2007 while maintaining its substantial presence in the region. On November 12, 2007, Quicken Loans announced its development


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