As the scope of the domestic car companies diminishes, a virtual international trade zone is emerging as Southeastern Michigan redefines itself as the "brain center" of the global automobile industry.
Last year, 24 international companies – most of them automotive – announced plans to locate or expand operations in the region. According to a 2005-06 report issued by the
Detroit Regional Economic Partnership these companies invested an estimated $123.8 million, resulting in 1,064 new jobs. In the last five years, foreign companies, according to John Carroll, Jr., executive director of the Partnership, have invested more than $1 billion in the region. Southeast Michigan is home to 854 foreign companies from 28 countries, the Partnership report indicates. Not surprisingly, most of the major Asian automotive manufacturers -- Honda, Nissan, Hyundai, Suzuki, Mitsubishi, Toyota-- have established a presence here.
From far east to the mid westAll told, foreign companies invested $2.6 billion in Michigan during the last five years – most of it in Southeast Michigan, according to Michael Shore, spokesperson for the Michigan Economic Development Corporation.
"Michigan is seen as a place where you find skilled workers and an educated technical workforce” as well as respected research universities," Shore says. "Companies go where the talent is. It’s easier to move your business operation to Southeast Michigan where you have thousands of engineers. You can’t go anywhere else on the planet and find as big a body of talent."
The key issue for most foreign investors, however, is whether Michigan a good place to find a market and be a successful manufacturer, explains Carroll. "Can they find a technology partner? Is the cost of doing business better here than in other places? In some cases, they already know the opportunity is here."
The emergence of China as an automotive manufacturing center, coupled with the presence of more than 60 percent of the automotive suppliers and much of the industry’s engineering talent in the region overcomes concerns about the business tax rate, perception of urban crime and decay, and the historic anti-Asian bias. Companies want to be where the decisions are being made in the automobile industry. "Many of the decisions for China are made here in Detroit," says Carroll. For example, North American Finuchem, a French company, specifically established an office to connect with American-based suppliers operating in China, Carroll explains.
On the other hand, foreign suppliers, positioning themselves to serve the international automobile manufacturers in the United States, are now also doing business with American companies. One supplier,
Denso International, with three facilities in the region, was strictly a Toyota supplier but now also does work for American auto companies, indicative of the diverse nature of Michigan automotive transactions today.
Some Asian companies initially set up shop on the West Coast, then realize that they need to be in Southeast Michigan, according to Carroll. Tempo, a Chinese automotive supplier, established its American operations in Los Angeles but has since relocated into Canton Township. Shanghai Automotive Industry Corp, a General Motors joint venture partner, was originally based in San Francisco but has since moved to Troy.
A delegation from
Automation Alley recently conducted a trade mission to China and developed contacts with several prospective companies, including Changfeng and Chery, two manufacturing companies that may establish research facilities in the region.
"China is going to be what the Japanese were in the ‘80s and the Germans were in the ‘90s, in terms of the amount of investment coming into this region," explains Nevshehir. "China is trying to develop its own indigenous automobile industry. The quickest way to do this is merge or set up joint venture with automotive suppliers in Southeast Michigan; gain access to their technology and their managerial know-how, and their distribution network."
The evolving automobile research and development economy will add fewer jobs, but they will be higher paying, as manufacturing jobs disappear by the thousands. Even companies like Hyundai, which has assembly operations in Alabama, established its research and development offices in Southeast Michigan.
Perhaps most notable, though, is the presence of Toyota, which in the past might have represented the "enemy" in our midst. Today, however, it’s a major player in a global automotive industry. The Toyota Technical Center (TTC), established 30 years ago, built its Ann Arbor engineering and design facility in 1991 and recently announced plans to build an additional $187 million facility in York Township by mid-2008. The new facility will increase Toyota’s Michigan workforce to over 1,000.
The reason Toyota continues to invest here is the wealth of automotive engineering talent, the auto supplier base, and access to several university engineering programs for new employees and collaborative research, according to Bruce Brownlee, TTC senior executive administrator. "The proximity of logistically being close to that engineering talent base is very, very important for us," he explains. "So much of our business is what I would refer to as collaborative engineering. That means we’re working on components jointly with our supplier engineers. They are housed here and they are also working side-by-side with our engineers on how to make a component better. … It’s not just by CAD (computer assisted design) systems or talking on a phone. You’re actually looking at a piece, handling it, examining it, talking about it. The interactive portion requires daily contact with our supplier engineers."
The concentration of engineers in Southeast Michigan – evidenced by the large size of the Detroit section of the
Society of Automotive Engineers – allows for professional synergy unlike anywhere else in the world, explains Brownlee. Monthly programs let engineers to examine each other’s work in a collegial environment.
Quality of life vs life sciencesSoutheast Michigan is proving to be a desirable place to live as well as do business, despite its winters. Affordable quality housing, good schools, and, as one Asian executive pointed out, access to plenty of good golf courses are assets, according to Shore. While not a deal-maker, lifestyle issues as basic as “a good place to raise a family” become significant in the decision-mix, adds to Dan Movens., CEO of
Caraco Pharmaceuticals, a domestic company in partnership with its major shareholder,
Sun Pharma Global, of India. A quarter of Caraco’s 380 employees are Indian.
"It’s a great area," says Movens, who moved from South Florida to Detroit. "When I bring people here I show them downtown out to the suburbs. I tell them how great it is to raise a family here – the Midwest attitude and friendship, which is much different than the East Coast states, much different than South Florida. They see that readily."
The Sun Pharma partnership infused the struggling Caraco –which specializes in generic drugs-- with talent and products that have fueled steady growth. A 2002 product-development agreement resulted in 25 new products. The company has completed $3.6 million in plant renovations adding 10,000 square feet of manufacturing and is planning a $20 million, 104,000-foot expansion that will increase its workforce by 100.
Life science development in southeast Michigan has been a slow but steadily growing segment of international business investment and partnerships. Companies such as Ann Arbor's
Cerenis Therapeutics (with its French connection) and
Thomson Medstat (which has offices around the globe) --not to mention the University Of Michigan's international reputation for research-- are helping to evolve the region's economic landscape.
Asterand, a British company with a facility in Detroit’s
TechTown, has experienced considerable growth in its five years collecting, cataloging and distributing human tissue to global research interests. Randal Charlton, founder and CEO, believes the region is well-suited for international business, especially Detroit Metro Airport, offering flights to all major population centers of the world with no more than one connector.
Nothing will replace the wholesale loss of automotive and pharmaceutical jobs in Michigan any time soon, Charlton says. But there is potential for developing a life science industry, based on the intellectual infrastructure of the state’s universities. The key is to lure international interest in the area based on sound business opportunity: Access to academic research in an entrepreneurial environment, venture capital, and good, low-cost housing with good schools, and a good airport, he says. "In Detroit and the [metropolitan] area, we’ve got it in spades. …We’ve got to go out and tell our story."
The story being told, however, is that of a failing domestic auto industry, reduced manufacturing capacity and lost jobs. However, there’s another story being enacted in the international crossroads of Southeast Michigan’s rolling wooded landscape: Engineers and other creative minds are quietly retooling the "Motor City."
Dennis Archambault is a Detroit-based freelance writer who also contributes to Model D.
Photos:
Flags at Ford Motor Company HQ - Dearborn (photo by Bill Schwab)
Computer circuitry
The new Hover SUV by Chinese automaker Great Wall
A new 2008 Lexus manufactured by Toyota
High tech chip technology