A ray of light in Detroit? A triad of good auto news lifts beleaguered city’s spirits

Auto industry gains are lifting Detroit’s spirits

DETROIT — It’s too soon for parades, but oft-maligned Detroit — hammered with high unemployment, steeped in public corruption and forever connected at the axle to an ever-evolving auto industry — shows small signs of rumbling back to life.

In a city all too familiar with bad economic news, the past week has brought a triad of hope: $2.1 billion in earnings for Ford Motor Co. during the first three months of the year, an announcement from General Motors that it would pour $890 million in investments into five factories across the country and a drop in losses for Chrysler.

Add that to Japanese automaker Toyota’s declining fortunes amid acceleration and brake problems, and some are starting to wonder: Could Detroit come back?

“It would be silly to say ‘It’s all over and everything is good.’ I don’t think we want to go back to the old ways,” said 41-year-old Ford electrician Rick McDonald.

But a profitable Ford means a little more job security. Employees that had cut back on spending over the lean period may start to change those habits, he said.

“We make decent money and we also spend a lot of money,” McDonald said. “When the Big Three are hurting, you cut back. Seeing how Ford has turned around, you see most of the Ford employees opening up a little — with caution.”

Any steps forward, no matter how large or small, are welcome in Detroit, which has been in financial trouble for the past several years, with a budget deficit that had swelled to more than $300 million. Its leadership troubles are also notorious: One-time hip-hop Mayor Kwame Kilpatrick resigned and went to jail in a text-messaging sex scandal in 2008.

More than one in four working-age adults are without jobs. Unemployment in the Detroit region was 15.5 percent last month, and it’s not getting better.

Residents are also realistic about what hope means. The car companies are not promising new jobs, despite their recent progress. When more people are hired, or brought back to work, then it will be clear that times are changing, said Khalid Anaia, who owns a small restaurant in the shadow of Ford’s Rouge Plant outside Detroit.

It is still risky to start a business here, but he took a gamble. Anaia bought his restaurant in March after moving to Detroit from Virginia Beach, Va. Anaia said his wife was attracted to the Detroit area because of its large Arab American population. Never mind that as Ford, GM and Chrysler downsized and laid off workers, business owners that depended on their patronage suffered and many closed.

His Shaheya Restaurant serves Middle Eastern and American food. The aroma of spices is strong and the menu features ghallabah, tawook, falafel, burgers, fries and onion rings. The eatery is small, more like a diner. Lunchtime and after-work crowds are the largest, typically made up of workers from a nearby Marathon refinery and steel company. Only a few are from Ford, but Anaia expects that to change as Ford’s fortune continues to improve.

“Even though they are struggling, they still have employees,” said Anaia, who hopes his business can expand to offer catering to the plant.

There is a hesitance, though, to give credit to the car companies if there are wisps of better days blowing into the city. Many, like 29-year-old attorney Leor Barak, credit any change to the individual economic decisions the city and its citizens have been forced to make when the car companies crashed.

“No doubt that Ford doing better is going to help the economy. It’s a big relief,” said Barak, who moved into the city two years ago from one of its northern suburbs. “But I think it’s one of the biggest mistakes we’ve made. We’ve depended on the auto industry instead of diversifying our economy.”

Barak moved into Detroit’s West Indian Village — a mix of stately, older homes close to the Detroit river on the city’s east side — during the onset of the mortgage meltdown. It’s a decision he doesn’t regret — and he believes things are getting better.

“It’s not because of what I see, but what I know,” Barak said. “I know the people who are here; the people now in office. They are making tough decisions that needed to be made 30 years ago.”

Mayor Dave Bing, a former local businessman and ex-NBA great who stepped into politics in the wake of the Kilpatrick scandal emphasized the creation of small businesses as integral to Detroit’s future.

Bing also has pledged to clean up long-neglected neighborhoods and submitted a budget that would cut the city’s deficit down to $85 million. He’s using federal stimulus money to tear down about 6,000 abandoned houses over the next two years.

Time will tell if small businesses will locate, en masse, to Detroit, but Bing told The Associated Press this week that there is more confidence among residents and business owners.

“While we are not out of the woods, the groundwork is being laid for a city that is more financially sound; conducive to business and responsive to resident’s needs,” he said.

At Avis Ford, a dealership in Southfield, just north of Detroit, profits were up 16 percent last year. But whether that’s a sign of a turnaround is murky.

Mark Douglas, president of the dealership, began making difficult choices several years ago. They included changing management and focusing more on selling smaller, fuel efficient cars instead of trucks. Avis, like the auto companies, cut jobs to cut costs — about 35 over several years.

If anything, he says, he made his business small enough to become profitable.

“It’s hard to say if things are turning, but Detroiters are eternal optimists,” Douglas said.

For many, optimism is tempered by a small or missing paycheck.

Michael Savu, a 50-year-old Novi resident and former automotive engineer, is a casualty of Chrysler’s problems. Savu was earning $90,000 annually until his 2008 layoff from the automaker.

Like the car companies, he’s had to reinvent himself to learn new skills in a world where autos no longer are king. Savu has taken information technology classes and now works 25 hours per week just to make ends meet. The new job pays $22,000 and has no benefits.

“If you’re part of the unemployed, it hasn’t gotten that much better,” Savu said. “There are a whole lot of people out there looking for a job.”