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Motor Industry capital declares Bankruptcy

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Motor IndustryDetroit has been known as the Motor Industry capital of the world for over five decades; with several of the U.S manufacturers having their ‘homes’ entrenched in the city’s history; namely General Motors, Chrysler and Ford.

The step taken by the US City of Detroit to declare itself bankrupt is to protect itself from creditors comes after an announcement that the city has debts totally about $18billion. Detroit is the largest city to do so in the United States so far.

Can any lessons be learnt from this declaration by countries and other cities around the world? Lets’ hope so.

The city of Detroit didn’t take advantage from the Golden Age of the American Motor Industry, which brought it success and prosperity for well over half a century. Two of it’s biggest errors were; confining it’s economic investments and activities mainly to the Motor Trade. It neglected to diversify it’s economy and take advantage of it’s presence and reputation within, what was at the time, the largest market in the world.

The city’s second mistake came at a time when the American Motor Industry started to decline as it’s competitors were starting to become more prominent and influential. Germany and Japan started to make rapid steps and advancing within the Motor Trade, investing in new technologies, whilst the US was affected by internal corruption and continued to rely on a prestigious, yet outdated reputation.

Traditional competitors

The City’s Administration has realised that changes had to be made and introduced technological changes over the last few years. However, the timing was too late. New players in the worldwide Motor Industry such as Brazil, South Korea and more recently China have entered the marketplace with a strong and determined presence.

The result has been catastrophic for the City of Detroit. The city has been abandoned by most of it’s two million population, with levels roughly at around 700,000 and around 80,000 buildings also abandoned. The city has all but turned in to a ghost town, basic services have deteriorated – which will lead to more and more people leaving.

If the decline continues, in this once prosperous and wealthy city, which is part of the World’s biggest and richest economy, what would the case be if it happened in poor or developing countries. The consequences would be far greater.

Lessons need to be drawn from this unfortunate demise and from other experiences form across the globe.

Manchester

An example of acting proactively to curb a city’s decline comes from our own city of Manchester, which at one point was a world centre for fabric manufacturing. It failed after the industry collapsed due to strong competition from foreign exporters. The resulting effect was for England to be displaced as the World’s largest textile exporter. However, unlike Detroit, Manchester’s Officials and Administrators quickly acted, diversifying the city’s economy. And with time it turned into a hub for university education and began competing with other prestigious cities such Oxford and Cambridge.

This change and the development of other services and productives spared the city from an economical collapse, putting it back on the map of British Economy.

The changes undertaken by Manchester proves that the process of diversifying or shifting from a certain economic sector is not an easy move. But never the less, trying to predict future trends and taking into account technological and scientific advances that will ultimately lead to changes in the nature of consumer goods and how they will meet the demands of consumers in this, the age of the Information Revolution. It is a very important issue in order to maintain growth and remain within the circle of competition.