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Thursday, July 25, 2013

Mack Stamping, or a Tale of Detroit's Decline

...[Mack] was a six-story structure [from] 1916...

Detroit is in bankruptcy for three reasons. One is that a city is a fixed cost enterprise, and so adjusting to a sharp drop in revenue is hard to impossible. The second is that Detroit really was the Motor City, but by the 1950s was suffering from the common fate of manufacturing, where as a general rule productivity increases outstrip the growth of demand. The third is that Detroit suffered from the disadvantage of being a first mover: the layout and location of factories reflected the environment of the 1910s and 1920s. Ford Motor Company literally outgrew Detroit, as it moved first from the Piquette Plant to Highland Park in 1910. It began work on its Dearborn Rouge complex in 1917. By the late 1920s it no longer operated inside the city [though in fact Highland Park was itself a separate city, albeit entirely contained within the boundaries of Detroit].

Chrysler's Mack Avenue stamping plant, where I worked during the summers of 1972 and 1973, is a good example of this process. The plant itself was a six-story structure that began as the Michigan Stamping in 1916, making metal and welded assemblies for multiple customers. The facility was bought by Briggs Manufacturing in 1920, in time to catch the rise of enclosed steel bodies. It became a major supplier to Chrysler, which didn't make its first car until 1925. Eventually – in 1953 – Chrysler purchased the facility. (In this Chrysler was fairly late to the game, as GM first purchased a stake in Fisher Body in 1916, and became a full-fledged internal division in 1926.) In other words, by the time I worked there, the plant was already 50+ years old. In my recollection, production only took place on the bottom two floors, while the top two floors couldn't be used; the floors in between were used to store inventory. Production required hauling material up and down freight elevators. Meanwhile, the plant was surrounded by residences and other factories; there was no open land.

http://www.allpar.com/corporate/factories/mack-avenue-engine.html
http://www.allpar.com/corporate/factories/briggs.html
 

Productivity was low not because of unions (though jurisdictional fights were a pain, foreman weren't supposed to turn on and off machines, that was reserved for millwrights). It was simply ancient technology in an ancient building. Presses for large pieces required four men; two would manhandle sheet metal into the die and get it seated properly, two more would pry it loose and put it on a table or conveyor for the next press. For a piece with a lot of curves such as a station wagon roof, my recollection is that there could be as many as 7 presses. Only in 1974 did the company begin trying to use mechanical handlers, suction cups on arms that would slide in, grab a part, and pull it out; by the end of the summer and my return to school, none of them worked reliably. In contrast, today such body panels are made in a single automatic transfer press turning out many, many more parts per hour, attended by only one or two people instead of 29 (28 on the presses, plus a foreman). Higher quality sheet metal for stampings, decades of learning how to pick up and move parts without scratching surfaces, and improvements in press design and die design all contributed. To make matters worse, the layout meant the giant machines were in the middle of the plant, whereas the road access – the shipping docks – were at the end, hundreds of feet away. (The middle of the plant had rail access, but while in the 1970s steel still came in by rail, parts were shipped out by truck.)

For more on stamping plants, go HERE thanks to Sam Ronald

Over time the industry shed thousands of jobs – though some were added back as the market grew and as first emissions and safety requirements, and then consumer demand, led to far more complicated vehicles: air conditioning, power windows, catalytic converters, automatic transmissions, airbags and more. However, that didn't benefit Detroit. Already by the 1970s most of the output of Mack Stamping was sent outside the city – the only assembly plant was Jefferson Avenue. But Chrysler's assembly plants themselves were old. When capacity was added in the US and Canada, new plants reflected different design and manufacturing principles. First, plants were on one level – that transition was already underway by the 1920s as machines with individual electric motors displaced belts pulling power off of overhead shafts. With that the efficiency of a multi-story buidling vanished. In addition, new plants had truck access along their length, and ready access to one of the major interstates. Now Mack Stamping's location wasn't bad as it was only a mile from an entrance to I-94. But many other of Detroit's plants reflected not only the location of rail lines but also the old trolley system – and of course therefore lacked parking.

So as the demand for cars expanded following World War II, and as Studebaker, Packard and other firms shut their doors, the Big Three had to add assembly plants. For that however they needed 1,000-acre sites, for one-floor buildings with more elaborate foundations to take heavier machines, and with room for trucks to maneuver along the full length of the plant, a plant made larger with an integrated stamping plant. Existing plants couldn't be torn down, their footprint was too small and they were often locked in urban streets. Vacant land in such quantity simply didn't exist inside the city. Jobs (and the tax base) moved to the suburbs and further afield.

By 1960, the population was already falling. (The graph is from a blog by Thomas Sugrue.) But people didn't leave in a convenient fashion; while some black neighborhoods had been severed to make way for expressways in the 1950s, Detroit remained a city of multiple small communities. The city simply became less dense. That meant that the per person cost of providing schools, police and fire protection rose rather than fell, because nighborhood schools, fire stations and police precincts couldn't be closed. Fewer jobs meant lower revenue per person. And neither the state nor the Federal government were willing to provide subsidies from stopping the scissors from eventually cutting the city's jugular.

Yes, there was corruption. Is there a big city for which that was not the case? Yes, politicians were short-sighted. No surprise there, either. Yes, the Big Three were poorly managed, and stuck in a strategic position thanks to the direct and indirect subsidies to energy that meant these companies had no small cars when the first and second oil crises hit. Yes, quality was abyssmal (though in the midwest Japanese cars rusted out instantly, one reason market share in the region remained low). That however was an issue of management – at Mack Stamping I was required to hit volume targets, even if every single part was scrap because of flaws in design and machine maintenance. That wasn't the UAW's fault, and until the 1970s the premium over other areas of manufacturing was minimal. Nor was it their fault that they didn't die according to the 1950s pension schedule, but the Detroit Three funded pensions as though they would. Then there's healthcare, and while their benefits were gold-plated, the cost was driven by defects in the US healthcare system, not union contracts.

New entry – first Japanese firms, and subsequently German and Korean – accentuated the pace of exit from Detroit. That wasn't the union's fault, though politicians – in this case Ronald Reagan with his Voluntary Export Restraint – did encourage the Japanese to set up shop here, and adhered to a strong dollar policy that made imports attractive. Race was a contributing factor, as Thomas Sugrue argues – see this interview in Historically Speaking drawn from his fine book, The Origins of the Urban Crisis. But these were not what led to Detroit's downfall, nor was it anything recent – not post-1990, much less post-2007. Instead it was the scissor of fixed costs and falling revenue due to long-run industrial change.

Mike Smitka

A tongue-in-cheek blog post on air conditioning as history's most important invention did suggest one more factor: in the early 20th century living in the South was most unpleasant for many months of the year. (The Alleghanies are sprinkled with ghost towns that functioned as resorts well into the 20th century. A few, such as the Greenbrier, survived the transition.) Improved transportation made possible "snowbirds," and air conditioning made it possible for northerners to conceive of living in the South year-round. Surely without air conditioning BMW would not have located in South Carolina or Mercedes in Alabama, while many more Detroiters would have retired in situ. Ironically, the first use of air conditioning outside of industry was at the Hudson Department Store in downtown Detroit in 1924.