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Granholm's 'insourcing' may pay off

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Wednesday, November 17, 2004

Granholm's 'insourcing' may pay off

Governor receives pledges for some jobs, but she knows full well tough work remains at home.

By Daniel Howes / The Detroit News

STUTTGART, Germany - For a foreign investment mission that's supposed to be more about building relationships than bringing home the bacon, Gov. Jennifer Granholm's first official trip overseas appears poised to deliver results.

After two days of meetings, many of which were scheduled with the expectation that good news would soon follow, the deliberate policy of downplaying expectations still applies. It should, particularly when the erosion of jobs back home makes whatever gains the governor may secure here look pretty meager by comparison.

But this "insourcing" - which is what direct investment in the United States by foreign-owned companies actually is - creates tax-paying, income-producing and economically viable jobs nonetheless.

"We want to insource jobs, not just outsource them," Granholm said in public remarks here Monday. "We must diversify within the auto industry and diversify outside it. That means international investment. The companies that include what we call the auto industry either didn't exist 20 years ago or were completely irrelevant."

In a visit Tuesday to Wilhelm Karmann GmbH, which assembles the Chrysler Group's Crossfire roadster in its Osnabrueck facility in northern Germany, Granholm received assurances that the contract automaker plans to expand its North American production facility in southeast Michigan, adding another 125 jobs to its workforce of 250 employees.

Today, she and Oakland County Executive L. Brooks Patterson will make the pitch that Mahle GmbH, a Stuttgart-based engine components supplier with annual revenues totaling $3 billion, should move its North American headquarters to Michigan from Tennessee. The company employs 3,100 in 11 locations - two of them in Michigan -- across United States.

A visit to J. Eberspaecher GmbH & Co. in Esslingen, whose North American headquarters and Espar Tech Center already are located in Oakland County, is expected to yield the announcement, perhaps as early as today, of fewer than 100 new jobs.

But the big German prize sitting out there right now probably won't even make it on the governor's schedule here this week. DaimlerChrysler AG is seeking a site to build its so-called "heavy duty world engine."

The family of diesel truck engines would power Freightliner trucks in North America by 2007, followed by Mercedes-Benz commercial trucks in Europe, Fuso trucks in Asia and various DaimlerChrysler trucks in Latin America.

The leading contender is Detroit Diesel in Redford, according to DaimlerChrysler and state officials familiar with the situation. The $200 million project would create between 400 and 600 new jobs and mark DaimlerChrysler's second major engine-building investment in Michigan, following the "Global Engine Alliance" plant down in Dundee.

Landing Daimler's diesel deal would be a huge win for Granholm, Metro Detroit and the United Auto Workers. But it's no sure thing. Detroit Diesel and the UAW won't get the job if they're unwilling to craft a flexible contract that would enable DaimlerChrysler to build competitive engines for world markets.

If you're getting the impression that much of Granholm's agenda here in Germany is being driven by the prospects of success, that's because it partly is. A Michigan governor presiding over a painful transition in manufacturing, worsening financial stress in Detroit and a state budget under constant surgery can't lead a $40,000 trip to Germany and come back empty-handed - even if the bill is paid with private funds managed by the Michigan Economic Development Corp.

The pressure is only likely to increase as Michigan's economic transition -- the inevitable consequence of a clash between the global economy, entrenched Old Economy expectations and hyper-competition - continues. For evidence that Granholm's bureaucracy is hungry to show progress, look no further than the stack of press releases issued by the Michigan Economic Development Corp.

They tout the next slug of "cool cities" grants, a dubious program with a debatable premise that mostly assumes top-down government plans can drive culture when most of us understand that the kind of change "cool cities" envisions comes from the bottom up. There is the next grouping of state-supported "brownfield" redevelopment projects, a virtual must for an industrial state and somewhat post-industrial age. And there are the jobs announcements.

Just Tuesday, the Michigan Economic Development Corp. announced five new projects that "create or retain more than 800 Michigan jobs and generate more than $207 million in new investment," according to a statement. None of the deals - one of which is a 240-job expansion of Pgam, a German automotive tool maker -- are blockbusters because the image and reality of Michigan's economy mostly works against such deals.

Selling the state to would-be foreign investors isn't necessarily an easy task, as Granholm learned after a speech Monday night to the prestigious James F. Byrnes Institute. If Michigan is the automotive capital of the world, one woman asked, how come its roads are so awful?

If Michigan is the epicenter of auto industry, why does its largest player - General Motors Corp. - solving its chronic European problem by closing plants? And shouldn't Michigan be on the leading edge of aggressive emissions rules much like California?

Ever the lawyer-sprite-politician, she answered all three questions in a predictable way to those of us who understand the issues: Washington doesn't give Michigan all its road money; she's not familiar with GM's European problem (for which she should be pleased); no, Michigan shouldn't enlarge a state-by-state patchwork of emissions rules that mostly just drives costs higher for automakers.

This trip is a necessary step for this governor, who needs to hear first-hand that even the most well-intentioned pitches for new investment in an Old Economy state may be necessary, but not necessarily sufficient. The toughest work is at home - managing Michigan's tax burden lower, crafting policy to fill the educational and skills void of Michigan's youth, speeding the permitting process, attacking high workers compensation rates and joining with business and labor to address Michigan's comparatively high cost of health care.

Close those competitive gaps and the closing deals in places like Stuttgart would be easier.

Daniel Howes' column appears Sundays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or at [email protected]

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