Detroit Reacts to Obama Manufacturing Initiative

detroit crumbling infrastucture
President Obama has recently unveiled the locations of the three cities who have won their bids to play host to new manufacturing hubs meant to boost the sector. Detroit, one of the hardest-hit manufacturing areas in the country with regard to industry and job-loss, has shown cautiously optimistic reactions to Obama’s new manufacturing initiative. This is unsurprising considering that the rocky road traveled by the Detroit automotive industry was part of the worst decline in U.S. manufacturing ever recorded.

In the fiscal years of 2000 to 2010, the U.S. lost 5.5 million manufacturing jobs, or one-third of the entirety of the American manufacturing sector. It was a loss that exceeded job loss during Great Depression. But unlike other periods of massive job loss in the U.S., wartime production did not bring about as great a recovery, since unlike in WWII, much of the manufacturing for the recent war efforts has taken place outside the United States.

Experts in this market seem less concerned than people in cities like Detroit which have been devastated by the losses. Manufacturing experts have indicated that the job loss rate indicates greater efficiency in the sector as a whole; greater automation, more streamlined production, modern business and manufacturing practices as reflected in the Gross Domestic Product. But according to government information, all the growth shown in the GDP for the manufacturing sector relates to two areas; electronics and computers. The other 18 segments of the manufacturing sector have shrunk, indicating an overall decline in the sector of 11 percent. When compared with the up to 35 percent increases shown in the decades preceding the 2000s, and there is cause for concern.

Today President Obama announced the cities chosen to be the new hubs of manufacturing in the U.S., in an attempt to revitalize the sector. Raleigh, SC is one such city. The other two cities chosen are Chicago, IL, and Canton, OH near Detroit. These three cities will enjoy an investment from the federal government, specifically the Department of Defense, in order to create three manufacturing institutes.

detroit manufacturing service jobs graphAs Canton and Chicago play host to the Caterpillar and Boeing as well as to universities, they make good locations for the new program. Federal contribution to these two hubs is $140 million, with a matching $140 million expected from the private sector, to be used to create a light metal manufacturing industry in Canton and a digital design and high-tech manufacturing industry in Chicago. In a later stage of the program, Raleigh will get most of their federal funds from the Department of Energy in order to host an institute focusing on the development of electronics powered by next-generation methods.

The president’s original 2012 proposal discussed creating 15 such institutes throughout the U.S., at a federal cost of one billion dollars and using the same concept of public-private shared funding to boost manufacturing and innovation in American business. When Congress failed to pass the proposal, President Obama created a $200 million bidding competition to ensure the first three centers would go up.

The total federal contribution is estimated to be $320 million, with $70 million in funds per state coming from the Pentagon, or later in the case of Raleigh, from the DOE. The state of Illinois has pledged $16 million to the project, while many other outside interests will contribute funds, including the nearby corporations and universities most expected to benefit from the initiative. The hope is that these hubs will combine research from the nearby universities with innovation from the manufacturing companies in order to boost the overall output of the cities and the U.S., and to create a more competitive edge for the American economy.

Some economists have stated that the amount, despite the matching donations from the private sector, will not accomplish much. Others have stated concerns that the U.S. is trending more toward service sector expansion than to manufacturing. Still others say that federalizing businesses stifles innovation and growth, and that the U.S. has less of a manufacturing problem than it has a problem encouraging private enterprise due to over-regulation. If the federal government was to relax federal mandates in the business sector in favor of incentivizing environmental regulations and other business practices, they argue, businesses will have more room to keep their competitive edges while still working to better their relationship with local economies and environments.

Michigan residents, on the other hand, have so far welcome the initiative. Though it is unclear how many jobs will be created with the inception of these hubs, the hope is that the light metals manufacturing will boost the automotive industry’s attempts to produce more lightweight components for car bodies. This tactic will make U.S. automotive companies more competitive by enabling the production of lighter, more fuel-efficient vehicles even as they furnish space to achieve the DOD’s goal to bolster defense capabilities with the creation of more lightweight armored vehicles. The DOD in turn hopes that new armored vehicles can be produced that can both withstand roadside bombs while yet remaining light enough to be transported from danger by helicopters.

John Anthony, a trustee of the Canton effort, has opined that the initiative could generate significant revenue for the historically downtrodden area, creating “tremendous” opportunities for the local economy. His comments were made to the Detroit Free Press, highlighting the fact that the Detroit area is possibly the hungriest of the three future hubs, having withstood decades of job loss and infrastructure decay due to hits taken to the automotive industry since the 1980s. Detroit’s mayor, Mike Duggan, has said he is prepared to “maximize” the jobs to come from the initiative so that Detroit residents profit from the deal.

Having won their bid with a convincing proposal to the DOD, Detroiters have reacted with cautious enthusiasm to Obama’s manufacturing initiative. Crystal H., a former Michigan resident who moved to the Seattle area due to a lack of job availability in her home state greets Canton’s proposed institute with wary excitement.

Detroit graph manufacturing“People are so desperate there, they’re going to fall on any steady job like a pack of wolves. These are people who have lost everything; pensions, careers, upward mobility, status, hope for the future. These are loyal, hardworking people with families who worked for the automotive industry for 20, 25, 30 years and then it all just disappeared overnight. They’re working at Walmart now, not using their skills, with nowhere else to go and no hope for retirement. My sister still lives in that area, and they are hurting. They’ll be cautious at first, because they’ve been burned a lot; but they won’t care if the jobs come from the private sector or the DOD, as long as the jobs aren’t going anywhere. They’ll commute, they’ll do whatever they need to.”

If the new institutes are not transitory as some industry insiders fear, there is no doubt that they will be an improvement on current conditions in areas like Detroit, bringing a much-needed source of jobs and revenue to rebuild the failing infrastructure of the area. It falls to the consortiums who bid for these cities to see that the development of these manufacturing hubs will function to the benefit of the local job markets even as they contribute to the overall health of the U.S. manufacturing sector. If reactions from Detroit are anything to go by, Obama’s manufacturing initiative will be a welcome addition to the Canton area.

By Kat Turner

Sources

ITIF
Fox Business
Boston Herald

One Response to "Detroit Reacts to Obama Manufacturing Initiative"

  1. Adebayo Adeleke   March 4, 2014 at 10:39 am

    Awesome outlook on the proposed maunfacturing hubs. I believe Raleigh is in North Carolina, not South Carolina.

    Reply

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