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Cheney: Desperate times in Detroit called for high-tech measures

For Ford CEO Alan Mulally, the 2009 North American International Auto Show called for a stiff upper lip.

Just three years after arriving at Ford, Mulally was dealing with the worst downturn in the car industry's modern history – demand had fallen by more than 30 per cent, and Ford had taken out almost $24-billion in loans to finance a make-or-break corporate overhaul.

The company was fighting for its life. And so were its competitors. GM and Chrysler had taken massive bailouts from the U.S. government and declared bankruptcy to get out from under a crippling load of costs that included everything from wages to health care for retired workers (this item alone added an estimated $2,000 to every car built in Detroit).

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The 2009 car show reflected the industry's grim state. Workers had erected hoardings to hide empty sections of the Cobo Centre's vast halls – a record number of car companies had dropped out as sales plunged. Among the no-shows: Nissan, Infiniti, Mitsubishi, Suzuki, Rolls-Royce, Land Rover, Ferrari, and Porsche.

One writer compared the 2009 show to the sinking of the Titanic.

Mulally, a former Boeing engineer, was known for his grasp of complex manufacturing, and for his ability to stay cool in a difficult situation. The 2009 show called for both. Mulally stood in front of an acid-green Ford Fiesta compact (one of the global-platform cars he had bet billions on) and delivered an upbeat message:

"There's no doubt there will also be unprecedented opportunities to introduce more customers to the Ford brand," he told a band of reporters. "We're excited about what we have to offer."

Mulally was playing the ultimate poker game. As the market continued its brutal free fall, he had doubled down, investing a fortune in new-car development. The outcome was anything but assured.

"Everyone was in the septic tank," says David Cole, chairman emeritus of the Centre for Automotive Research. "The Big Three had to put on a brave face, but they were scared. No one was sure if they were going to be around next year."

The 2014 North American International Auto Show, which opens next week, reflects a dramatically different picture. Five years after the show that marked Detroit's nadir, the Big Three are all making money, and foreign manufacturers have returned to the show in force.

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But the world of car manufacturing is not the same as it was in 2009. If you head north from the Cobo Centre on the grand boulevards that once helped Detroit earn its reputation as "the Paris of North America," you encounter the city's new reality: mile after mile of collapsing homes, deserted office buildings, and ruined industrial spaces. Deer roam through abandoned neighbourhoods. Last summer, the city declared bankruptcy.

Despite all this, Detroit is in the midst of an industrial comeback, transitioning into a new age of manufacturing that has upended the industrial paradigm, along with the city itself. Car companies are hiring, and the city's outer suburbs are booming. Work that once went overseas is returning to Michigan as rising labour costs and shipping rates erode the advantage of countries such as China.

Building in Detroit makes sense again, but the new world of domestic car making has created a dramatic shift. Inside Ford's Flat Rock assembly plant, I witnessed the way things work in the new paradigm. The plant was nearly three million square feet, yet it contained only a smattering of humans. Automation was the order of the day. Industrial robots with 10-metre arms picked up the side panels of new Mustangs and spun them in their steel fingers, dropping the sides into massive jigs that lined them up within thousandths of a millimetre.

Then the robots withdrew, making way for smaller arms tipped with welding heads – these new robot arms showered sparks as they fused the body parts together with perfect welds that no human being could hope to match for precision, consistency or speed.

According to industry analysts such as Cole, today's car plants operate with a third as many human workers as the factories of just 20 years ago. And today's assembly workers make a fraction of what their forebears did.

From the time of the Model T onward, Detroit was a magnet, drawing workers from small-town America with the promise of secure, good-paying jobs. By the 1960s, Detroit was known as Motown, an industrial and social powerhouse. Berry Gordy turned Motown records into an international phenomenon, and drivers cruised Woodward Avenue to show off their glittering new cars.

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The days of that blue-collar dream are gone, replaced by a low-wage reality. Although Detroit manufacturers worried about rising labour costs for decades, it took the economic meltdown of 2008 to finally tip the balance in their favour.

After decades of hardball negotiations, the United Auto Workers union found itself with a weak hand – domestic car manufacturers were sliding toward bankruptcy, and automation was reducing the value of human assembly workers.

Worst of all, falling demand meant that manufacturers had far more plant capacity than they could use. In 2009, Ford sold just 1.6 million cars (nine years before, its sales had been 4.2 million). Over all, the industry's excess capacity was estimated as high as 40 per cent. As the recession deepened, millions of unsold cars piled up in lots across North America.

The UAW was forced to accept wage concessions, and saw its membership plummet as manufacturers closed unneeded plants and pushed for dramatic productivity increases in the ones that remained.

At the Flat Rock plant, I could see the impact of these changes. In the old days, most of the parts to build a car were stockpiled, but at Flat Rock, parts arrived by truck mere minutes before they were needed, in a vast and complex industrial choreography known as Just In Time (JIT) manufacturing.

The JIT protocol represents an upending of the vertically integrated manufacturing system Henry Ford pioneered at his Rouge River plant back in the early 1900s – at the Rouge, ships and trains brought raw materials like iron ore, timber and raw rubber, and the factory turned them into Model Ts, performing virtually every operation in-house, from smelting steel to moulding tires.

Today, many of these processes take place at subcontractor facilities, and parts are streamed to the plant from thousands of different sources. (Some parts are stored by courier companies like FedEx and UPS, and are automatically shipped when tracking software indicates they're needed.)

"Everything's different now," said Flat Rock plant manager Tim Young, who started at the plant in 1984 as a process engineer in the paint department.

Since the economic meltdown, the Big Three have closed more than a dozen car plants in the U.S., and sharply reduced the labour costs of each car they build. At the time of the 2009 car show, the Detroit makers had a cost disadvantage of approximately $2,000 per car compared with their foreign competitors. That situation has been reversed.

Despite the decline of the assembly worker, Detroit is on a hiring spree. Ford alone is planning to hire 5,000 people in 2014.

Near Ford's famous headquarters, I stood in a black-draped room that had nothing in it but a rectangular aluminum frame that looked like a stage-lighting support. On top of the frame was a series of tiny spheres that turned out to be 3-D projectors. An engineer handed me a headset equipped with a set of goggles. When I slipped them on, a car suddenly appeared in front of me – it was a three-dimensional image, rendered in the empty space before me by the spheres.

I could walk around the virtual car, or even get inside it, considering it from all angles to judge everything from the way the radio controls were placed to whether the angle of the hood allowed me to see the curb when I parked. I could change the car's colour, and observe it in different lights.

This virtual car was made up of millions of digital co-ordinates that engineers and designers had created in their computers. Software allowed them to build anything from a motor to door handles to a carbon-fibre roof panel, assemble them in virtual reality, then send the digital co-ordinates to mills, presses and moulding machines that would make the actual parts.

Next up was a meeting with a team of industry analysts, who seemed to be part accountant and part engineer, with a good dose of crystal ball gazer mixed in. The analysts watch TV, surf the web and meet with companies like Google and Facebook, attempting to divine the mysterious ways of the consumer.

On the other side of town, I met with GM designers and engineers, including Rob McMahon, who helped create the new GMC Canyon pickup truck. McMahon spent his days studying automotive forms and bringing a studied aesthetic to pickup trucks, imbuing them with features that will lure buyers.

Then I spent an illuminating half hour with Tadge Juechter, a brilliant engineer who led the design of the new Corvette C7-R. Juechter knew everything from the flow rate through the C7-R's radiator to the weight of the carbon-fibre tube that carried power from the engine to the rear-mounted transmission. "Every element in this car was analyzed," he said. "We thought about every last piece, and how they all work together."

As we studied the car, I realized that human minds had conceived and perfected the design, but every piece of the actual machine had been milled or hewn by robot tools. Everything looked perfect. And I could see that there was a healthy job market in Detroit. Just not on the assembly line.

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