Thursday, May 11, 2006

Detroit Grapples With a New Era: The Not-So-Big 3

May 11, 2006
Detroit Grapples With a New Era: The Not-So-Big 3


DETROIT, May 10 — Fans of the Detroit Red Wings hockey team have booed plenty of opposing teams over the years at Joe Louis Arena, but last month they let loose at another traditional Detroit opponent: Toyota. What set them off was a new Toyota FJ sport utility vehicle that circled the ice during the second intermission of an April 11 game between Detroit and Edmonton.

The outburst showed how the Motor City is still having trouble adjusting to a new reality here: the Asian car companies that Detroit once vowed to vanquish have moved squarely into the front yard of the capital of American automotive dominance.

Toyota and Nissan and Hyundai of South Korea have opened gleaming technology centers and are hiring some of Detroit's most talented engineers and designers. They are also becoming more a part of the city's social fabric by supporting local charities, sponsoring teams like the Red Wings, and lending a distinctly Asian flavor to previously homogeneous suburban neighborhoods.

There are signs the city is making progress adjusting to the transition. Gone are the days when fans of the Big Three companies angrily vented their frustrations, as they did 25 years ago, by taking sledgehammers to foreign cars at special events. Nor does anyone still talk seriously, as Henry Ford II did in the 1970's, about pushing Toyota and Honda "back to the shores" of Japan.

Still, old attitudes die hard, and it does not take much for them to flare up. In a town where the United Automobile Workers union has long banned foreign cars from its lots, union members at Ford's local plants decided last winter to kick everything but Ford vehicles out of the choicest spots. Now, "non-Ford-family" cars and trucks are relegated to far-off parking spaces.

Workers at Ford, as well as G.M., have been badly shaken by their companies' slumps. The two automakers collectively plan to cut 60,000 jobs and close more than two dozen plants over the next few years. They have lost billions of dollars in North America in recent years, and their share of the market has dipped to its lowest point ever because of gains by Japanese and Korean automakers.

Just last week, for the first time, Toyota beat DaimlerChrysler in monthly car sales. It has already overtaken Ford in worldwide sales and, if current trends hold, it will overtake G.M. in the not too distant future. On Wednesday, Toyota reported a net profit of $12.1 billion for the fiscal year ended March 31, making it the most profitable manufacturing company in the world.

That may be why no less than Ford's chief executive, William Clay Ford Jr., great-grandson of the company's founder, is now warning that blind patriotism to Detroit's old ways is dangerous.

"If we are invested in that even 1 percent, we are going to lose," Mr. Ford said in an interview late last month. But he also acknowledged the difficulty in changing those attitudes.

"This is an insular industry and an insular town," he said.

Indeed, there are still signs that Detroit is trying to circle the wagons. The troubles at G.M., which lost $10.6 billion last year, have generated enormous sympathy here for the company and its embattled chief executive, Rick Wagoner, who has become something of a symbol of Detroit's fight against outside forces.

Those include the billionaire Kirk Kerkorian, the company's biggest shareholder, whose representative, Jerome B. York, has publicly pushed for change at G.M. and recently joined the company's board.

"We Almost Lost Rick!" read the headline on a story last month in Automotive News, the trade publication that covers the global industry. In it, the paper detailed how Mr. Wagoner threatened to quit if his board did not back him in the face of a media storm that declared his job to be in jeopardy. (The board did issue a statement of support.)

But statewide, the support for the homegrown companies is beginning to wane in one essential way, if ever so slightly. Five years ago, Detroit's Big Three took 90.8 percent of auto sales in Michigan, according to J. D. Power. Lately, that has slipped to 88.3 percent — compared with about 55 percent nationwide.

One reason is that the makeup of the state and especially its wealthiest areas has simply changed. Though still a fraction of the whites in the suburbs and the blacks in Detroit, the number of Asians living in the four counties surrounding Detroit has more than doubled since 1990, to over 120,000. Nearly half live in upscale Oakland County, helping to further diversify an area that includes a sizable Arab population, centered in Dearborn, where Ford has its headquarters.

The public school that Mr. Ford's son attends in Ann Arbor, home to the Toyota Technical Center, is more than 40 percent Asian, he said. Hiller's Markets, a six-store chain of upscale grocery stores across the metropolitan area, features entire refrigerator and frozen-food cases with a selection of products that rivals a Tokyo shop, including pickled plums, Japanese brands of energy drinks and fermented soybeans.

In suburbs like Novi, about 35 miles northwest of Detroit, some real estate agents do 90 percent of their business with Japanese customers. Spots in the city's English as a Second Language program, offered twice a year, fill up as soon as classes are made available.

"In an hour and a half, we're done," said Bob Steeh, director of community education for the Novi Public Schools.

One popular class features field trips to Home Depot, a funeral home and a local hospital, meant to show newcomers how life is lived differently from back home. But others stick to what they know best.

Yoko Watanabe, 50, who moved to Novi 10 years ago to join her husband, Yasue, an interpreter, edits a local Japanese business newsletter and teaches Japanese to schoolchildren and businessmen.

"My husband sometimes reprimands me for not trying to blend enough or know Americans more," she said, speaking through her husband, who interpreted for her.

The new environment traps Detroit between its traditional identity and whatever new role it may play in a global automotive world, said William Pelfrey, a former G.M. speechwriter and the author of the book, "Billy, Alfred and General Motors," about two former G.M. leaders: William C. Durant and Alfred P. Sloan.

"Clearly the old Detroit as the Motor City is history," Mr. Pelfrey said. "But the jury is still out on what Detroit is going to become."

Michigan's governor, Jennifer M. Granholm, is trying to provide one answer. Facing the loss of thousands of traditional auto jobs, and with a tough re-election race looming this fall, she is zealously competing for an engine plant that Toyota has indicated it wants to build in a Midwestern state.

Ms. Granholm, who has already visited Japan once to lobby for the factory, plans another trip soon— as does Indiana's governor, Mitch Daniels, who wants the plant for his state.

The changing complexion of the city is one reason a Detroit radio personality, Paul W. Smith, now regularly interviews executives like Carlos Ghosn of Nissan and James Press of Toyota on his morning show, long a platform for the city's auto figures.

"Anybody who is paying attention and who is making a difference is not booing Toyota and Nissan," said Mr. Smith, who has a show on the Detroit radio station WJR and occasionally sits in for Rush Limbaugh on his national show.

At his invitation, Toyota has become a sponsor of Mr. Smith's annual golf tournament benefiting Detroit's Police Athletic League — something that would have been "impossible" a decade ago, he said. Mr. Smith said he believed that the region would come through the industry's crisis, but not without some re-examination. "Things are not going to be the way they were," Mr. Smith said.

For his part, Mr. Ford does not think everything about the old Detroit needs to be discarded. Despite recent efforts by Toyota and other foreign companies, Detroit automakers still lead in backing the city's vast array of charities, he said.

What he wants to see, both for his city and for his employees, is a more realistic attitude about their place in a global industry. "I see what's happening to this world — how it's shrinking, how immigration is changing, and I think it's fascinating and invigorating," Mr. Ford said.

Instead of booing the Japanese competition, Detroiters may want to recall the counsel of Mr. Ford's great-grandfather, the original Henry Ford, who once said: "Don't find fault — find a remedy. Anybody can complain."

Jeremy W. Peters contributed reporting from Novi, Mich.for this article.


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