I took a drive from the auto show at Cobo Hall straight up Woodward to the old Model T factory in Highland Park.
Try it. The view yields a certain perspective and reveals some clues about what happened here.
This factory -– what’s left of it -- is where it all began. Henry Ford and his $5 a day job. The American Way of Life. The Middle Class Standard of Living. These are gifts our grandparents gave to us.
You would think the factory would be a museum but instead it is a rubble pile of shattered glass, asbestos and pigeon droppings. It is surrounded by a discount clothing warehouse, a strip mall and an empty lot.
Henry Ford’s office occupied the fourth floor where he could stand in the window and survey his mechanized kingdom that employed 87,000 people, its smokestacks greasing the sky with wealth.
If Henry Ford was standing in that window today, he would not see assembly lines or smokestacks. Instead he would see a warehouse full of boxes containing tens of thousands of defaulted Ford automobile loans.
Ford did not believe in debt. And he did not extend it to his customers. Instead, a buyer could purchase a car on layaway. That’s when General Motors stepped in, creating GMAC, its finance arm that allowed people to buy automobiles on installment payments.
You might say mass credit -– buy now, pay later -– was a Detroit invention too.
The Big Three have clawed their way back to profitability, thanks in large part to a taxpayer-funded bailout and speedy bankruptcy proceedings for GM and Chrysler.
Their near collapse was blamed on the unionized worker. But that is a half-truth at best. American auto workers are more productive than their German and Canadian counterparts. And they cost less. According to Forbes, Germany made more than 5.5 million automobiles in 2010; the U.S. built 2.7 million. At the same time the American autoworker made an average $33.77 per hour while the German earned $67.14.
But the Germans and Canadians are profitable. Why? One reason is they don’t expect their companies to float pension and health care legacies. Those are spread across society as a whole. In the United States, however, the companies foot the bill and when you add in the costs of those retirees the cost of an auto worker balloons to $73 an hour. It’s another instance of buy-now-pay-later. It’s unsustainable.
And if you need any proof, look around in any direction from the Model T plant. We’ve had to ship our jobs to the Third World to make a car profitable.
What really happened? We ate too much.
There are fewer consumers able to buy a new car. In much of metro Detroit, a new car costs more than a house.
In 1914, when Ford offered the $5-a-day job, a worker could buy a car with four months pay. Today, it would take a newly hired autoworker earning $14 an hour more than six months to buy one of Ford’s cheapest models.
Look at it this way: that $5-a-day job when adjusted for inflation equals $4.98 today. We’ve lost 2 cents over the 98 years.
What would Henry Ford say standing from that window looking down at the boxes of default? He would remind us what we already know. Work hard. Save your money. Pay your bills. Don’t borrow what you don’t have.
But Henry Ford could not look down from that window today. A tree is growing in his place.