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Detroit: Economy


Major Industries and Commercial Activity

Automobile manufacturing continues to be a primary force in the Detroit economy, and Detroit is the nation's only older city that is home to a state-of-the-art auto assembly plant. In recent years, however, dependence on the auto industry has decreased—the city lost 39 percent of its manufacturing jobs in the 1980s—while the services sector has increased. Still, the automobile rules, and as go auto sales, so goes the Detroit area economy. While manufacturing has globalized, virtually all of the key engineering, administrative, and testing functions of the Big Three take place in the Detroit area, employing thousands of highly-skilled and well-paid workers. Most of the world's suppliers of auto parts, such as Delphi and Guardian Industries are also located in Detroit, and advertising firms such as Campbell-Ewald, BBDO, and McCann-Erickson, do millions of dollars in annual business with the large automakers.

There is also a budding industry growing up around firms researching hydrogen fuel cells and other non-petroleum power generating technologies that may drive the automobiles of the future. More than 75 percent of the labor force is employed in non-manufacturing jobs in such areas as research and development; accounting, law, and financial services; computer services; and personnel and clerical support. The Henry Ford Health System is the sixth largest employer in the state and is a major research center. Detroit ranks among the five major financial centers in the United States; offices of all the "Big Eight" accounting firms are also located there.

Metropolitan Detroit is the world headquarters for General Motors Corp., Ford Motor Co., DaimlerChrysler Corp., and Volkswagen of America. Other national and international corporations headquartered there include Kmart (which merged with Chicago-based Sears & Roebuck in 2004), Compuware, The Budd Company, American National Resources, and Federal Mogul. Oakland County, one of the country's wealthiest counties and directly north of the city, promotes its Auburn Hills area as "Automation Alley" due to the large number of robotics firms that have located there in recent years.

Items and goods produced: automobiles and automobile products, gray iron, machine tools and fixtures, foundry products, paints, varnishes, lacquers, chemicals, pleasure boats, paper and twine, air conditioning equipment, aircraft bearings and cushions, bolts, screws, nuts, boilers, tanks, ball bearings, tools, steel plates, flues and tubes, rubber goods, non-electrical machinery and automation equipment in pharmaceuticals, rubber products, synthetic resins, computer software, and robotics equipment and technology.

Incentive Programs—New and Existing Companies

Local programs

Revitalization of Detroit's downtown and neighborhoods is a top priority for city leaders. The Mayor's Office of Neighborhood Commercial Revitalization offers help via grants to community organizations operating or opening shops in city neighborhoods.

State and federal programs

Parts of Detroit are designated Michigan Renaissance Zones, which are virtually tax free for any business or resident presently in or moving there. Detroit is one of only five cities nationwide designated a federal empowerment zone. Businesses in the 18.35-square-mile zone are eligible for federal incentives. Other incentives on the state level include tax abatements, tax-exempt revenue bonds, public loans and grants. The state administers an award-winning brownfield redevelopment program, community development block grants, long-term fixed rated financing for small and medium-sized businesses, and more.

Job training programs

In 2003 new mayor Kwame Kilpa-trick created the Detroit Economic Development Organization, which has an Employment and Training Department. Several outstanding nonprofit organizations also maintain job training facilities, including Goodwill Detroit and Focus:HOPE, a now-legendary Detroit organization founded by a Catholic priest and other community leaders in the aftermath of the devastating 1967 riots. The center provides training in everything from basic reading to high-technology machining and computer-aided design.

Michigan offers a coordinated job training system using federal, state, and local resources to provide a highly productive and trained workforce. Grants can provide funding for activities that increase worker productivity. The training itself is done through the institution of the company's choice. Free recruitment and screening services are available for new and expanding employers through the Michigan Employment Security Administration's job service and also through several local school districts. Michigan Economic Development Corp. (MEDC) administers a $30 million job training program, which provides assistance to employers to train or retrain workers to meet marketplace needs. MEDC also administers Michigan Economic Growth Authority grants, which award credits against Michigan's single business tax to new or expanding businesses.

Development Projects

While Detroit continues to experience population loss similar to other large industrial cities, significant incentives such as the availability of inexpensive land and federal empowerment zone money have led to a development boom over the last decade. Since the late 1990s and the administration of former Mayor Dennis W. Archer, business investment in the city of Detroit has surpassed $15 billion. So many projects were announced that in 1999 Site Selection magazine named Detroit its number one metropolitan area for business development for the third consecutive year. Detroit attracted 1,133 new or expanded facilities that year, almost double the nearest competitor, Chicago. Among the new projects in Detroit completed in the early 2000s are Campus Martius, a giant office (housing the headquarters of Compuware, one of the world's largest software development companies), retail, and hotel development considered the most important downtown project in decades; two stadiums—the $450-million Ford Field, a domed multi-use stadium built in part from the massive Hudson's warehouse building, and the $285 million Comerica Park, which opened in 2000 as the new home of the Major League Baseball's Detroit Tigers; and three casinos, which generate hundreds of millions of dollars in much-needed tax revenue and provide hundreds of jobs. Further south, Wayne State University broke ground on an expansion of its 200-acre Detroit campus by establishing a research and technology park amid an evolving residential and office district. The Detroit Symphony Orchestra also got into the action, with a privately funded renovation of Orchestra Hall on Woodward, along with construction of the adjacent Max M. Fisher Music Center, a new 450-seat recital hall, and a multi-million dollar, state-of-the-art music education center.

Economic Development Information: Detroit Regional Chamber of Commerce, One Woodward Ave., Suite 1900, PO Box 33840, Detroit, Michigan 48232-0840; telephone (313)964-4000.

Commercial Shipping

Detroit is a major international market. The Greater Detroit Foreign Trade Zone, the largest zone in the country, processes $2 billion in goods annually. The passage in 1989 of the United States/Canada Free Trade Agreement established the largest free trading block in the world, further expanding the parameters of the Detroit market. Detroit is adjacent to Windsor, Ontario, Canada, and more foreign trade passes through the port than any other in the United States.

The Port of Detroit has direct access to world markets via the Great Lakes/St. Lawrence Seaway System. The Port is comprised of seven privately-owned terminals with thirteen berths on the Detroit and Rouge Rivers. All types of cargo can be processed through port facilities; in 2000 cargo volume totaled more than 17 million tons. Service is provided by four tug and barge lines as well as two auxiliary companies, one of which operates a mail boat that is the only boat in the United States with its own zip code.

The tremendous amount of goods produced in Detroit requires a vast distribution system relying not just on the waterways, but also rail and truck carriers. More than 700 motor freight carriers use Greater Detroit's extensive highway system to transport goods to points throughout the United States and Canada. Trucking service is coordinated with that provided by the four rail lines maintaining facilities in Detroit.

Labor Force and Employment Outlook

Despite the efforts of Governor Jennifer Granholm to maintain the state's manufacturing base and recruit new companies to Michigan, Michigan's unemployment rate of 7.2 percent in 2005 was among the highest in the U.S. in the early 2000s. Reflecting a nationwide trend, the biggest loss of jobs was in the generally high-paying manufacturing sector. In addition, the nation's deep recession following the 2001 World Trade Center attack brought deep job cuts and layoffs in the automotive industry; not surprisingly Detroit fared even worse, and in 2005 the jobless rate in the city was at 8.2 percent. Much of an anticipated rebound in the region's economy and job growth the second half of the decade was expected to come in the high-growth regions of Oakland County (to the north of Detroit), Macomb County (northeast), and Washtenaw County and greater Ann Arbor (to the west).

The following is a summary of data regarding the Detroit metropolitan area labor force, 2004 annual average:

Size of non-agricultural labor force: 2,051,000

Number of workers employed in . . .

construction and mining: 85,800

manufacturing: 297,800

trade, transportation and utilities: 383,000

information: 36,200

financial activities: 117,000

professional and business services: 357,700

educational and health services: 256,200

leisure and hospitality: 181,600

other services: 98,500

government: 237,300

Average hourly earnings of production workers employed in manufacturing: $24.85

Unemployment rate: 8.2% (February 2005)

Detroit: Economy

Largest employers (2002) Number of employees
Detroit Public Schools 26,000
City of Detroit 20,799
The Detroit Medical Center 11,836
U.S. Government 11,363
Chrysler Group 9,707
Henry Ford Health System 7,337
General Motors Corp. 6,865
U.S. Postal Service 6,157
St. John Health 5,767
State of Michigan 5,637

Cost of Living

A 2004 worldwide survey conducted by Mercer Human Resource Consulting ranked Detroit the 16th costliest American city to live in, and the 101st most expensive worldwide. In 2003 the median home price in the city was $145,000, compared to $163,000 nationally.

The following is a summary of data regarding several key cost of living factors in the Detroit area.

2004 (3rd Quarter) ACCRA Average House Price: $324,420

2004 (3rd Quarter) ACCRA Cost of Living Index: 107.5 (U.S. Average = 100.0)

State income tax rate: 3.9% (2005)

State sales tax rate: 6.0%

Local income tax rate: 3.0% residential; 1.5% non-residential

Local sales tax rate: None

Property tax rate: $67.97 per $1,000 assessed valuation (2003 millage)

Economic Information: Detroit Regional Chamber of Commerce, One Woodward Ave., Suite 1700, PO Box 33840, Detroit, MI 48232-0840; telephone (313)964-4000.


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