Positive Plaza Alternatives

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	Positive Plaza Alternatives Part I: The Future of the Automotive Industry in Port Huron Over the last thirty-five years, the “new domestic” manufacturers such as Honda, Kia, and others rose to economic power based on an ordinary cost advantage – they could build similar cars as the Big Three for less money. The reasons are many – the union labor force of the domestics was paid more than the non-union workforce of the new domestics, the new domestics built their cars where taxes and other costs are lower, and many people felt that the Japanese, in particular, “bought” market share by accepting thin profit margins for years while they built up acceptance for their brands. Many people feel the Korean companies are doing the same thing right now. Equally important, the Japanese had adopted certain manufacturing techniques that were optimized for the entire life of a car from artistic conception to recycling the worn-out vehicle. This is the essence of what is now known as the Toyota Production System and the result was a fundamental cost advantage for the new domestics. That the Big Three did not respond aggressively to meet this challenge is to their lasting shame but changes nothing with respect to our current situation. However, understanding what happened and what is going to happen next to Port Huron is critical if we are to meet the changes that are coming. It is no secret that the domestic auto companies made serious mistakes but political blindness and ineptitude were equally to blame. The public and our politicians did not accept that wages and taxes must be competitive with other areas of the country and bitterly fought the efforts of the auto companies to reduce costs. We argued our work force was smarter and better trained but none of this was really true. As a result, the domestic auto companies took on the problem the only way politics and the law would allow…by incrementally moving “content” out of their companies and into supplier companies that had the political ability to leave the state without attracting attention. While the Big Three were determined to keep certain things like artistic design, vehicle assembly, distribution and financing, all three determined that they would spin off many of the parts that could be engineered and manufactured outside their company…and outside Michigan. To this end, Chrysler formed Acustar then sold it to Textron. Textron sold to Collins & Aikman and now Collins & Aikman is bankrupt. GM formed Delphi and Ford created Visteon and both of them are now, essentially, bankrupt. They all tried to do the same thing: move vehicle content to low wage, low tax states, and to Mexico and now China. Over a period of decades this process allowed them to avoid some of the plant closure laws, unions, excessive health care and pension costs, pandering politicians, high taxes and other encumbrances. Because the state and the public would not permit them to compete here in Michigan they did the only thing they could do: they left. We can argue about the details of how all of this happened and who is to blame until the stars fall from the sky but it will not change this reality: over the coming few years most of our few remaining local automotive parts plants will close and they will never reopen. Our local leadership needs to understand that this process cannot be stopped by any means – legal or otherwise. And we cannot worry about what happens in the rest of the state of Michigan – our concern is what we can and must do to revive our local economy. We must develop other industries to take the place of the car business. We have an opportunity to base our recovery around our gateway bridges to Canada. Part II: The Bridge Plaza Project It is inevitable that Port Huron will lose the automotive manufacturing base that has provided most of our core employment for the last thirty years. New industry and commercial investment must be attracted to Port Huron or every person here will suffer in the form of unemployment, underemployment, declining property values and weakened infrastructure. The spark for this recovery is the bridge plaza project. If you are sitting there fat and happy because you have a job and loathe new development or are fussing over diesel exhaust or big trucks, you need to put aside your personal feelings and think about the people here that are out of work and heading for financial ruin. If this upsets you, too bad. The time for soft words was ten years ago. The time to “cowboy up” and deal with it is now. The bridge project has the potential to draw two hundred million dollars of cash into this area immediately in construction and real estate purchase money. It has the potential to draw commercial revenue from a thousand miles away in the form of truck plazas, hotels, restaurants, truck service, tires, fuel, truck sales, housing for personnel, medical services, dry cleaners, hot dog stands, tourism, art, and every other service and product family. However, before any of this can happen the fighting between the city and the state must cease. We all know that this project will be built. Trying to delay or stop this project is dangerous because the serious development that must occur to bring the real jobs to this area will be paid for with private, at-risk dollars. And if the at-risk dollar owners see that our city is inhospitable to their investment, those dollars will go to Arkansas, Missouri, and Georgia where the reception – along with the weather – is warm. First of all, let’s get a grip on the potential tax loss the city is in such a tizzy over. The tax collections on $32 million of real estate at a 39-mill rate are $1.25M dollars per year. This is an insignificant amount of money. To put this in context, you cannot build a single gas station or a party store for a million dollars. And simply replacing the lost tax revenue with some mechanism that does not add capital value is destructive, not constructive. What we need is constructive economic growth and the creation of wealth is driven by business creation not tax collection. You cannot tax your way to prosperity, you have to earn it. We have, effectively, fifteen percent unemployment. This is a disgrace to our community. Moreover, we are also losing the equity in our homes – equity that many have planned to use for retirement or to fund college for their kids. And the unemployed are losing self-respect. This time it is essential that our leadership understand the greater economic picture and make absolutely, positively sure that we take commercial advantage of this extraordinary event. The lost tax revenue of $32M in tax base is meaningless compared to the increase from additional business formations and land development that we MUST have to replace the dying car business. And if you are not downright angry about this situation it is because you do not understand how bad it really is. Look around you – SEMCO was just sold to a company in Texas and if you think they will keep those jobs in Port Huron out of the goodness of their heart, you are mistaken. The city must persuade the state and federal government to build as massive and gorgeous a facility as the prosperity in the other 49 states will allow. We must explore every possible angle to figure out how to build a LARGER complex, not a smaller one. We must look for empty land within the city limits that could be acquired for resale to Truckstops of America and Bob Evans and Holiday Inn. We should be seeking catalog distribution firms to locate in the empty industrial park. We should be holding strategy sessions on tourist tie-ins and support tie-ins and state government expansion in our area and every other idea we can find to strike while this iron is hot. The time to have a vision of the future is now – a future with commerce and business and jobs for our citizens. Are there disadvantages and problems to solve? Certainly. Nothing good is easy or free. But with so many of our citizens in financial jeopardy, the time for bickering and stalling is over. We are the gateway between two of the truly great nations on earth and it is time to capitalize on our unique position.

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Part I: The Future of the Automotive Industry in Port Huron

Over the last thirty-five years, the “new domestic” manufacturers such as Honda, Kia, and others rose to economic power based on an ordinary cost advantage – they could build similar cars as the Big Three for less money. The reasons are many – the union labor force of the domestics was paid more than the non-union workforce of the new domestics, the new domestics built their cars where taxes and other costs are lower, and many people felt that the Japanese, in particular, “bought” market share by accepting thin profit margins for years while they built up acceptance for their brands. Many people feel the Korean companies are doing the same thing right now.

Equally important, the Japanese had adopted certain manufacturing techniques that were optimized for the entire life of a car from artistic conception to recycling the worn-out vehicle. This is the essence of what is now known as the Toyota Production System and the result was a fundamental cost advantage for the new domestics. That the Big Three did not respond aggressively to meet this challenge is to their lasting shame but changes nothing with respect to our current situation. However, understanding what happened and what is going to happen next to Port Huron is critical if we are to meet the changes that are coming.

It is no secret that the domestic auto companies made serious mistakes but political blindness and ineptitude were equally to blame. The public and our politicians did not accept that wages and taxes must be competitive with other areas of the country and bitterly fought the efforts of the auto companies to reduce costs. We argued our work force was smarter and better trained but none of this was really true. As a result, the domestic auto companies took on the problem the only way politics and the law would allow…by incrementally moving “content” out of their companies and into supplier companies that had the political ability to leave the state without attracting attention. While the Big Three were determined to keep certain things like artistic design, vehicle assembly, distribution and financing, all three determined that they would spin off many of the parts that could be engineered and manufactured outside their company…and outside Michigan.

To this end, Chrysler formed Acustar then sold it to Textron. Textron sold to Collins & Aikman and now Collins & Aikman is bankrupt. GM formed Delphi and Ford created Visteon and both of them are now, essentially, bankrupt. They all tried to do the same thing: move vehicle content to low wage, low tax states, and to Mexico and now China. Over a period of decades this process allowed them to avoid some of the plant closure laws, unions, excessive health care and pension costs, pandering politicians, high taxes and other encumbrances. Because the state and the public would not permit them to compete here in Michigan they did the only thing they could do: they left.

We can argue about the details of how all of this happened and who is to blame until the stars fall from the sky but it will not change this reality: over the coming few years most of our few remaining local automotive parts plants will close and they will never reopen. Our local leadership needs to understand that this process cannot be stopped by any means – legal or otherwise. And we cannot worry about what happens in the rest of the state of Michigan – our concern is what we can and must do to revive our local economy. We must develop other industries to take the place of the car business. We have an opportunity to base our recovery around our gateway bridges to Canada.

Part II: The Bridge Plaza Project

It is inevitable that Port Huron will lose the automotive manufacturing base that has provided most of our core employment for the last thirty years. New industry and commercial investment must be attracted to Port Huron or every person here will suffer in the form of unemployment, underemployment, declining property values and weakened infrastructure. The spark for this recovery is the bridge plaza project. If you are sitting there fat and happy because you have a job and loathe new development or are fussing over diesel exhaust or big trucks, you need to put aside your personal feelings and think about the people here that are out of work and heading for financial ruin. If this upsets you, too bad. The time for soft words was ten years ago. The time to “cowboy up” and deal with it is now.

The bridge project has the potential to draw two hundred million dollars of cash into this area immediately in construction and real estate purchase money. It has the potential to draw commercial revenue from a thousand miles away in the form of truck plazas, hotels, restaurants, truck service, tires, fuel, truck sales, housing for personnel, medical services, dry cleaners, hot dog stands, tourism, art, and every other service and product family.

However, before any of this can happen the fighting between the city and the state must cease. We all know that this project will be built. Trying to delay or stop this project is dangerous because the serious development that must occur to bring the real jobs to this area will be paid for with private, at-risk dollars. And if the at-risk dollar owners see that our city is inhospitable to their investment, those dollars will go to Arkansas, Missouri, and Georgia where the reception – along with the weather – is warm.

First of all, let’s get a grip on the potential tax loss the city is in such a tizzy over. The tax collections on $32 million of real estate at a 39-mill rate are $1.25M dollars per year. This is an insignificant amount of money. To put this in context, you cannot build a single gas station or a party store for a million dollars. And simply replacing the lost tax revenue with some mechanism that does not add capital value is destructive, not constructive. What we need is constructive economic growth and the creation of wealth is driven by business creation not tax collection. You cannot tax your way to prosperity, you have to earn it.

We have, effectively, fifteen percent unemployment. This is a disgrace to our community. Moreover, we are also losing the equity in our homes – equity that many have planned to use for retirement or to fund college for their kids. And the unemployed are losing self-respect. This time it is essential that our leadership understand the greater economic picture and make absolutely, positively sure that we take commercial advantage of this extraordinary event. The lost tax revenue of $32M in tax base is meaningless compared to the increase from additional business formations and land development that we MUST have to replace the dying car business. And if you are not downright angry about this situation it is because you do not understand how bad it really is. Look around you – SEMCO was just sold to a company in Texas and if you think they will keep those jobs in Port Huron out of the goodness of their heart, you are mistaken.

The city must persuade the state and federal government to build as massive and gorgeous a facility as the prosperity in the other 49 states will allow. We must explore every possible angle to figure out how to build a LARGER complex, not a smaller one. We must look for empty land within the city limits that could be acquired for resale to Truckstops of America and Bob Evans and Holiday Inn. We should be seeking catalog distribution firms to locate in the empty industrial park. We should be holding strategy sessions on tourist tie-ins and support tie-ins and state government expansion in our area and every other idea we can find to strike while this iron is hot.

The time to have a vision of the future is now – a future with commerce and business and jobs for our citizens. Are there disadvantages and problems to solve? Certainly. Nothing good is easy or free. But with so many of our citizens in financial jeopardy, the time for bickering and stalling is over. We are the gateway between two of the truly great nations on earth and it is time to capitalize on our unique position.

Positive Plaza Alternatives
Which would be worse? Port Huron getting stuck with an expanded Bridge Plaza? Or Port Huron getting stuck with an expanded Bridge Plaza while reaping no benefit from it?

A serious discussion about how the Plaza Expansion Project can benefit Port Huron and the Blue Water Area.