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One of the world's great commercial spectacles is being assembled in downtown Detroit – the North American International Auto Show is a glittering cascade of polished chrome, high-tuned machinery and expensive suits.

There's enough hype in the air for a dozen Donald Trump events – at the NAIAS, each new vehicle release is announced with the kind of thunderous awe you would expect if Jesus suddenly parted the clouds to announce his return.

But behind the spectacle is the auto industry's grinding commercial reality, a city's long fall, and a question that won't go away: does Detroit still matter?

There was a time when no one could imagine that this question would ever be asked. In the 1960s, Detroit bestrode the car world like a colossus. This was the town that invented mass production, then fine-tuned the marketing systems that endlessly stoked the fires of consumer demand – Detroit turned the car into a status symbol, up-sold buyers with ever-expanding option lists and instituted the annual model change.

Today, Detroit is producing the best cars it has ever made. And yet, the city is a fallen empire and the gravitational centre of the auto industry it spawned has moved elsewhere. Gone are the days of Henry Ford's famous, vertically integrated River Rouge complex, where ships and trains unloaded millions of tons of steel ore and timber at one end, and finished cars rolled out the other. Today's manufacturing is defined by a decentralized supply system in which components flow in from around the world for final assembly in plants dominated by robots.

And when those new assembly plants are built, it's not in Detroit – it's in Mexico, China or right-to-work states in the Southern United States. Even more damaging to Detroit than the shift in physical operations is the relocation of the auto industry's intellectual axis. When the next great shifts in automotive transportation are discussed, the conversation no longer centres on Detroit – instead, the cutting-edge is in Silicon Valley, Calif., where Google and Apple are focusing on a world where cars drive themselves and sales are no longer driven by social status and consumer aspiration.

For decades, Detroit shrugged off small, non-traditional competitors as irrelevant, and assumed its own massive scale and deep well of manufacturing and engineering talent would keep it on top of the automotive hill.

But now it finds itself in a world where technological disruption and social shift have altered the rules. The Big Three are regarded as legacy firms. When the talk turns to automotive cool and industrial innovation, the company on everyone's lips is Tesla Motors, an upstart California firm that has played David to Detroit's Goliath, designing and building the world's finest electric car while its chief executive simultaneously crafts cutting-edge space ships.

Detroit is not short on brain power. I can't count the number of smart engineers, designers and executives I've met there. Among them were Tadge Juechter, chief engineer of the Chevrolet Corvette, who turned America's sports car into a world-class machine, with a hydro-formed aluminum chassis and componentry worthy of a European exotic. Then there was Alan Mulally, the former CEO of Boeing Commercial Aircraft, who was recruited by Ford in 2006 to save the company as Detroit's Big Three staggered toward bankruptcy.

Mulally did save Ford, overseeing a corporate overhaul that improved everything from factory setup to the model lineup to suspension design. By the time he left in 2014, Mulally had cemented his reputation as a genius. And yet on the vehicle front, his crowning achievement was the launch of an F-150 pickup truck with a body made from aluminum instead of steel.

Although it generated major buzz and ramped up sales of an already successful truck, the aluminum body was anything but a game-changing technology. Land Rover had been using aluminum bodies on its off-road vehicles for decades, and by the time the new F-150 hit the market, aluminum was in common use across the industry on a wide range of vehicles.

Compared with Tesla's revolutionary all-electric Model S, the aluminum truck body was an incremental change to a legacy product. In terms of their relative technological importance, Tesla's car was an iPhone, while Ford's aluminum truck was an improved version of a 1999 Motorola flip phone.

Going to the Detroit car show takes you through a landscape of despair. Thousands of houses stand abandoned, once-great factories are now used as sets for post-apocalypse films and the city's population has fallen by more than a million.

Inside the beautifully lit halls of the car show, it's easy to forget the scene outside and to recall Detroit's incredible ascent. It started with Henry Ford, a farm boy with a talent for mechanical invention. Ford began building cars in a small Detroit building in the 1890s. Within a decade and a half, he had turned the car into a consumer appliance. Detroit became the greatest industrial centre in history, and its success altered the course of human civilization. The mass-market automobile sparked the creation of the national highway system, gave birth to the suburb and disrupted the world of business forever – the buggy-whip maker was dead, replaced by gas stations, drive-in theatres and drag strips.

Millions of workers made their way to Detroit and, at its height, the city was known as "The Paris of North America," thrumming with creativity, social action and raw commercial power. Detroit's Michigan Central was the tallest train station in the world, a beaux-arts masterpiece that handled more than 200 trains a day. Hudson's flagship department store, located on Woodward Avenue, was a 2.2-million-square-foot consumer palace, with 28 stories, four basements, and 50-passenger elevators, each manned by a white-gloved attendant.

In the 1960s, Detroit ruled the world of transportation. The assembly-line model created by Ford, combined with the stylistic manipulation and social engineering of GM masterminds such as Alfred P. Sloan and Harley Earl, made for record sales and unquenchable demand. Each year brought a crop of new, must-have car models.

By the 1970s, the first cracks in the business model began to appear. The OPEC oil crisis created demand for smaller, more efficient cars, but Detroit's expertise was in the big, powerful machines of its heyday. The VW Beetle became a countercultural icon and Toyota was offering its fuel-sipping machines to North American buyers. Detroit's answer came in the form of machines such as the Ford Pinto and the Chevy Vega – both would go down in history as flawed, deeply inadequate machines. The Pinto was best known for a faulty fuel filler that sparked fatal fires. The Vega's legacy was an engine that self-destructed due to fundamental defects in its engineering and metallurgy.

Although it took until 2007 for the Detroit industry to hit the wall, those in the know saw the signs of its eventual collapse more than 40 years earlier. Labour costs soared as quality slipped. Angered by ongoing confrontations with management, some Detroit workers took to welding Coke bottles into the sills of cars on the assembly line, creating a rattle that could never be fixed.

Management was no better. The barons of the Detroit industry pursued a business model based on keeping foreign competitors at bay with import tariffs, and fought efficiency and pollution-control measures being pushed by the U.S. government, arguing that they sapped performance and added unnecessary cost.

GM took an early lead in electric-car development with a project called EV-1, only to cancel the car and scrap every example it had built. Through the 1980s and '90s, Detroit stuck to a familiar formula: big vehicles and all-out power.

In 1997, Toyota introduced the Prius, a car that did what Detroit had said could not be done. The Prius cost the same as a typical mid-sized Detroit ride, but went about twice as far on each gallon of gas. The Prius used an advanced hybrid powertrain, regenerative braking and millions of lines of computer code to take automotive engineering into a new dimension.

Henry Ford tested his first car on the streets of Detroit in 1896. The Prius showed up 101 years later, in a land far away. By then, the automotive world had shifted on its axis and Toyota had long since deposed GM as the world's biggest car maker.

If you're in Detroit next week, go to the car show. Take in the glittering machinery. Marvel at the latest releases. Listen to the hype. Then take a drive through the city outside the car show and think about what used to be.

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