Has Detroit Bottomed Out?

Bob Simon profiles the city and the people who are working to improve it:




I have to say, it made me smile to see that guy with the New Holland baler out baling hay off of vacant lots. It'd be awesome to see him fence in a city block or two and run some cattle. I'm amongst the folks hoping for the best for Detroit. In 10 years I'd like to see stories about the amazing renaissance of Detroit.

How Does Ohio Kick Ass?

In affordable housing:

High-cost cities tend to have higher median incomes, which leads to the simple heuristic that, sure, it's costlier to live in San Francisco than in Akron, but the people who pay bills there make enough money that they can afford it.
In reality, yes, the median household income in metropolitan San Francisco is higher than it is in Akron (by about $30,000). But that smaller income will buy you much, much more in Ohio. To be more specific, if you make the median income in Akron – a good proxy for a spot in the local middle class – 86 percent of the homes on the market there this month are likely within your budget.
If you're middle-class in San Francisco, on the other hand, that figure is just 14 percent. Your money will buy you no more than 1,000 square feet on average. That property likely isn't located where you'd like to live. And the options available to you on the market are even fewer than they were just a year ago, according to data crunched by Trulia. To frame this another way, the median income in metro San Francisco is about 60 percent higher than it is in Akron. But the median for-sale housing price per square foot today is about 700 percent higher.

I guess that supply and demand thing is for real.

Today's Boom Towns and Ghost Towns

Job Growth Change, 2009-2013

Richard Florida points out changes in the job market from 2009-2013:

One thing I didn’t foresee in 2009 was the stunning rise of America’s energy belt—a region stretching from Houston to Oklahoma City to New Orleans and their surrounding areas that in 2011, by my estimation, produced some $750 billion in total economic output, more than Switzerland or Sweden. The Sun Belt features two kinds of regional economies: declining real-estate economies and booming energy economies. Energy stands alongside knowledge as the second pillar of America’s recovery.
Cities like Sioux Falls, South Dakota, and Bismarck and Fargo in North Dakota have experienced strong growth since the crisis, and fracking has brought flush times to out-of-the-way places in North Dakota, Wyoming, and other parts of the country. Several commentators have argued that places with energy-based economies or natural-resource-based economies, not knowledge metros, have been the real stars of the recovery. That goes too far. To put things in perspective, the economist Paul Krugman noted in March 2012 that while “employment in oil and gas extraction has risen more than 50 percent since the middle of the last decade … that amounts to only 70,000 jobs, around one-twentieth of one percent of total U.S. employment.”
The metros where low-wage jobs make up the largest share of job growth since 2009 are in the Rust Belt and the Sun Belt: St. Louis (where 90 percent of new jobs are low-wage); California’s so-called Inland Empire of Riverside–San Bernardino (where nearly three-quarters of new jobs are low-wage); New Orleans; Tampa; Orlando; Columbus, Ohio; and Rochester, New York (where more than half of new jobs are low-wage). Temp jobs account for an extraordinarily large share of recent job growth in Memphis, Birmingham, Cincinnati, Milwaukee, and Cleveland.

Not surprisingly, in this era of federal support for the economy, Washington D.C. is seeing a massive increase in high-wage jobs.  I was fascinated that Grand Rapids shows up so big in the map above.  I know they've become a biotech center, but I don't know if that is providing most of the growth there.  I'm also not as encouraged as he is about the potential of the energy sector to provide real growth, because our dependence on oil and gas is a broad tax on the entire economy.

How Detroit Went Broke

The Detroit Free Press looks into Detroit's finances through the years.  Yes, failure to shrink government payrolls and generous pensions played a major part, but I don't think anything is a bigger factor than this:

There was just no way to come to grips with that major of a population change, especially as those left behind were the poorest folks in the region.  A few other interesting causes of the financial trouble, smaller amounts of state aid, corporate welfare to bring back auto plants, and Mayor Kwame Kilpatrick's disastrous Wall Street deal to take on debt to fund pension plans:

The deal hailed by Wall Street was a disaster. The borrowing scheme now represents close to one-fifth of the city’s debt and stands as a key reason the city filed for Chapter 9 bankruptcy on July 18.
Many said it seemed like a good idea at the time, but the financial machination now stands as a prime example of the city’s willingness to borrow huge sums — and how Kilpatrick took borrowing to new heights.
For a year, Kilpatrick had lobbied the City Council to approve the idea of borrowing to fund pensions. The mayor said the city’s pension obligation, left unaddressed, would force him to lay off 2,000 employees.
But his new deal was designed to fix all that. He estimated the city would shave $277 million a year from its pension contribution obligation and prevent layoffs. It worked like this: Detroit sold pension obligation certificates of participation and shoved the money into its pension funds, making them nearly 100% funded. Separately, the city also bought so-called swaps, or derivatives, a complex Wall Street financial deal to permanently lock in steady interest rates in the range of 6%, a comparatively good rate at the time....
Three years later, interest rates tanked and the stock market collapsed. Detroit’s credit rating was downgraded. In desperation, the city pledged its casino tax revenue as collateral to creditors to avoid a payment of up to $400 million that, back then, would have pushed Detroit into a bankruptcy filing.
The city now owes $2.8 billion for principal, interest and insurance payments over the next 22 years, according to a Free Press review of the city’s records. The bill soared in part because the city made only interest payments for about five years.

Wow.

The DJIA Through History

Derek Thompson:

When the Dow Jones Industrial Average launched in 1896, it smelled like a turn-of-the-century factory farm -- nothing but oil, iron, cows, and cotton. You know. America. (Or as some folks prefer, 'Merica!)
Today, practically all of these companies -- Tennessee Coal & Iron, American Cotton Oil, Distilling & Cattle Feeding -- have been gobbled up by conglomerates that you have and haven't heard of. Only GE remains. Only the U.S. Leather trust is essentially defunct.
But I like that. We had an industrial-dominated economy, and now we don't. New time, new index. DJIA II for the auto and aerospace economy. DJIA III for the computer/financial economy. And so on.

 I really find the list fascinating.  And I think it deserves a little more attention than Thompson gave it.  The reason is that to kind of paraphrase Calvin Coolidge, "The history of the United States is the history of United States business (and probably religion)."  Almost all of the companies above are monopoly trusts (the Sugar trust, the Tobacco trust, the Whiskey trust (Distilling & Cattle Feeding), the Leather trust, the Rubber trust, etc.).  This was a very distinct period of time in the nation's history, and led to the modern state we now have.  There is a lot of interesting history in there.

For instance, Tennessee Coal & Iron:

The Tennessee Coal, Iron and Railroad Company (1852–1952), also known as TCI and the Tennessee Company, was a major American steel manufacturer with interests in coal and iron ore mining and railroad operations. Originally based entirely within Tennessee, it relocated most of its business to Alabama in the late nineteenth century. With a sizable real estate portfolio, the company owned several Birmingham satellite towns, including Ensley, Fairfield, Docena, Edgewater and Bayview.
At one time the second largest steel producer in the USA, TCI was listed on the first Dow Jones Industrial Average in 1896. However, in 1907, the company was merged with its principal rival, the United States Steel Corporation. The Tennessee Coal, Iron and Railroad Company was subsequently operated as a subsidiary of U. S. Steel for 45 years until it became a division of its parent company in 1952.....
The Tennessee Coal, Iron and Railroad Company was one of the largest users of convict leasing for coal mining labor in Alabama following Reconstruction. The number of convicts employed increased after U.S. Steel acquired TCI in 1907, as did the brutality of the conditions in which they labored. In 1908, the first full year of U. S. Steel's ownership of TCI, almost 60 convict workers died from workplace-related accidents.
In the 1910s, TCI undertook a comprehensive program to stabilize its labor force by developing rigorously-planned "model villages", thereby improving worker health, welfare and loyalty. This paternalistic approach carried with it obvious benefits for workers and their families, but also drew criticism for limiting the free movement and organization of labor....The last relic of the Tennessee Coal, Iron and Railroad Company, the Fairfield Plant, continues to be operated by U. S. Steel as one of its five integrated steel mills in the USA. It is the largest steel-making plant in Alabama, employing 2000 workers as of September 2006, down from a peak of 45,000 during World War II. With a single blast furnace and three basic oxygen process furnaces, amongst other various mills and production facilities, the plant produces 2.4 million tons of raw steel per annum and 640,000 tons of seamless tubular and sheet products, mainly for purchase by the booming oil industry in the region.

So one of the steel mills from a company that disappeared from the Dow Jones Industrial Average in 1907 is still in operation, even though it employs 43,000 fewer people than at its peak.  There is a lot of interesting shit in there.  Company towns, forced convict labor, largest corporation in the country at the time, etc.  In the next week or two, I'll try to pull up a few more interesting tidbits I found when I got bored at work today.

Update: A full listing of changes to the Dow.

Yankee Air Museum Wants To Move To Willow Run

Morning Edition:

Rosie the Riveter, with one of the most famous clenched fists in American history, embodied the message of hardworking women during World War II: We Can Do It. Now a nonprofit is hoping to carry on that legacy. In a little more than a month, the historic Michigan factory where Rosie and thousands of other women built B-24 bombers could face the wrecking ball. That's unless the Yankee Air Museum can raise enough money to salvage part of that massive plant.
As Michigan Radio's Tracy Samilton reports in this encore story, the museum sees the factory as the perfect place to start anew, after a devastating fire destroyed its collections.
TRACY SAMILTON, BYLINE: It's downright majestic, the way this huge hangar door on the old Willow Run assembly plant opens. Thirty-two feet tall and 150 feet wide, the doors were built that big so that finished B-24 bombers could be rolled out of the factory, then tested on the airport runway here before going to war.
GRANT TRIGGER: And what's remarkable to me is this is more reliable than my garage door.
SAMILTON: Grant Trigger is cleanup manager for GM's former properties in the state of Michigan.
TRIGGER: Built by engineers with slide rules in 1942, and it still works today.
SAMILTON: For decades, Ford's former bomber plant turned out cars for GM. But with GM's bankruptcy came a trust fund to find new developers for sites like this. The iconic place where Rosie flexed her muscles during World War II seemed fated for demolition.
TRIGGER: The size of the space, which was phenomenal at the time, is simply too big for today's manufacturing facilities. There's 83 acres under one roof.
SAMILTON: Eighty-three acres under one roof, nearly five million square feet, or the size of a huge housing subdivision. Surely, someone would want at least a little piece of that history. Enter the Yankee Air Museum. This nonprofit with an annual budget of $2 million and a paid staff of six had a big collection of historic airplanes, some of which still flew, along with aviation history exhibits until 2004.

83 acres under one roof?  Holy shit.  Willow Run had to be amazing back during World War II:

 Architect Albert Kahn designed the main structure of the Willow Run bomber plant, which had 3,500,000 square feet (330,000 m²) of factory space, and an aircraft assembly line over a mile long. It was thought to be the largest factory under one roof anywhere in the world. The Willow Run plant featured a large turntable two-thirds of the way along the assembly line, allowing the B-24 production line to make a 90° turn before continuing to final assembly. According to legend, this arrangement allowed the company to pay taxes on the entire plant (and its equipment) to Washtenaw County, and avoid the higher taxes of Wayne County where the airfield is located; overhead views suggest that avoiding encroachment on the airfield's taxiways was also a motivation.
The Willow Run Plant had many initial startup problems, due primarily to the fact that Ford employees were used to automobile mass production and found it difficult to adapt these techniques to aircraft production. The plant at Willow Run was also beset with labor difficulties, high absentee rates, and rapid employee turnover. The factory was nearly an hour's drive from Detroit, and the imposition of wartime gasoline and tire rationing had made the daily commute difficult. In only one month, Ford had hired 2900 workers but had lost 3100.
Also, Henry Ford was cantankerous and rigid in his ways. He was violently anti-union and there were serious labor difficulties, including a massive strike. In addition, Henry Ford refused on principle to hire women. However, he finally relented and did employ "Rosie the Riveters" on his assembly lines, probably more because so many of his potential male workers had been drafted into the military than due to any sudden development of a social conscience on his part.
By autumn 1943, the top leadership role at Willow Run had passed from Charles Sorensen to Mead L. Bricker.
At the request of the government, Ford began to decentralize operations and many parts were assembled at other Ford plants as well as by the company's sub-contractors, with the Willow Run plant concentrating on final aircraft assembly. The bugs were eventually worked out of the manufacturing processes, and by 1944, Ford was rolling a Liberator off the Willow Run production line every 63 minutes, 24 hours a day, 7 days a week.
At its peak, Willow Run produced 650 B-24s per month. By 1945, Ford produced 70% of the B-24s in two nine hour shifts. Ford produced half of the 18,000 total B-24s at Willow Run, and the B-24 holds the distinction of being the most produced heavy bomber in history.
A total of 6,972 Liberators were built at Ford, and 1,893 knock-down parts were provided for other manufacturers.

The scale is amazing.

Cargill Shuts Down Lake Erie Salt Mine for the Week

Cleveland Plain Dealer:

The Cargill salt mine below Lake Erie has stopped mining because of concerns that the roof 1,800 feet below ground could collapse.
That's according to Cargill spokesman Mark Klein, who said the company stopped mining salt on Monday after its first shift, sending about 100 employees home for the week with pay.
"We don't want anybody in that area in case part of the roof comes down," Klein said.
The problem is called "convergence," Klein said. "Either the floor is coming up a little or the ceiling is coming down a little."
Klein said Cargill monitors measurements of the shaft and the room at the bottom of the mine on a regular basis.
"We're looking for movements of like one one-hundredths of an inch," he said.
The mine has been operating for more than 50 years and has been owned by Cargill since 1997. The salt is extracted from the face of the mine using ammonium nitrate explosives.
The company is still operating and shipping salt, it's just not mining any new salt, Klein said. About 75 people are still working above ground at the site.
"Over the past few weeks we've seen some data points that we need to do more study on," Klein said.
Asked if the company has had previous safety concerns with the mine, Klein said, "Nothing quite like this."

Yeah, if the roof is coming down, I don't want to be there.  Here's some video footage in the mine.  Here's what happens when a salt brine operation goes bad.

Engineering-Rich Metros

A list that Dayton makes that isn't tremendously depressing:

America has always been a nation of tinkerers. Our Founding Fathers, notes author Alec Foege, were innovators in areas ranging from agriculture (George Washington, Thomas Jefferson) and electricity (Benjamin Franklin) to the swivel chair (Jefferson).
Engineering advances drove America’s quest for industrial supremacy in the 19th century, many of them borrowed (sometimes illegally) from the then very resourceful British Isles. By the early 19th century, the U.S. was producing its own major inventions, including the steamboat and cotton gin. By the end of that century, the U.S. was clearly on the way to industrial preeminence. The growth of engineering schools — MIT, the Case Institute, Stevens Institute of Technology, as well as departments at the great land grant universities — generated a steady supply of engineers. For much of the last 70 years, America, has been the world’s leading center of engineering excellence, dominating markets from steel and cars to energy and aerospace....Detroit’s bankruptcy has shed a bad light on rustbelt centers, but in reality the industrial Midwest has been on something of a roll in recent years, with many states, from Wisconsin and Ohio to Iowa, boasting lower unemployment than the national average. One key element has been the increasingly innovative nature of U.S. manufacturing, notably in the auto industry. Little-recognized Dayton, which ranks fourth, has attracted major investment for advanced manufacturing in autos and aerospace.

The write-up of San Jose mentions early research investment by the defense department and NASA.  The Houston part mentions the energy industry, but doesn't mention the massive NASA presence for most of the last 50 years.  Likewise, while Dayton has had a ton of engineers working in the auto industry and machine shops, Wright-Patterson has been the major driver for the last 40 years.  Apparently, government plays a pretty big part in employment of engineers.

Craft Distilleries Return To New York

Morning Edition:

A century ago, New York could claim that much of its liquor was local, thanks to distilleries large and small that supplied a lot of the whiskey, gin and rum that kept New York City (and the rest of North America) lubricated. Then Prohibition arrived and the industry largely dried up, before trickling back to life in the 21st century.
Now, distillers in New York state are toasting a revival 80 years in the making. Tuthilltown Spirits is one of the first boutique distilleries to open in New York since Prohibition. It's been 12 years since co-founder Ralph Erenzo bought the property in Gardiner, N.Y., a rustic corner of the Hudson Valley about 75 miles north of Manhattan....Now there are dozens of distilleries operating in New York State, from the Adirondacks to Brooklyn.....
At Tuthilltown Spirits back in the Hudson Valley, Erenzo has already scaled up to employ 26 people. He says craft distilleries are starting to have a real economic impact in New York, and beyond.
"People are getting hired. Old buildings are being reused," says Erenzo. "A craft is being reestablished in this country that hasn't existed for 70 or 80 years cause of Prohibition. People are building cooperages and malt houses. This is a rebirth of a whole industry."

I'll stick to my beer, but I'm glad to see the microdistillery industry grow.

The Detroit Bus Company

On a day when the city filed for bankruptcy:

The Detroit Bus Company from Dark Rye on Vimeo.