Pittsburgh’s Lessons for Detroit

There is a roadmap for the bankrupt Motor City—if it can find a way to fund the trip

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Rebecca Cook / REUTERS

A vacant and blighted home, covered with red spray paint, sits alone in an east side neighborhood once full of homes in Detroit, Jan. 27, 2013.

Detroit was a loser in the great global economic war that marked the end of the 20th century, its surrender made official yesterday when it filed for Chapter 9 bankruptcy. The defeat is financial, though the city bears some of the hallmarks of an actual war: blocks of homes in ruins; a depleted population that skews old and young; lawlessness; and unsustainable debt incurred fighting against foreign forces.

So what becomes of Motown? The Chapter 11 bankruptcy law, which General Motors and Chrysler filed under, allows a company to eliminate plants, people, and contracts as if they don’t exist once you get court approval. When a city files for Chapter 9 bankruptcy, there are creditors to escape, but no plant or people to walk away from. The city pension agreements—they are known as obligations for a reason —still exist. Detroit’s people are still there – albeit in far fewer numbers — and their needs haven’t changed.

(MORE: Motor City Meltdown: Long Road Ahead for Detroit’s Record Bankruptcy)

Detroit’s challenge is to do the same thing its car companies have done: reduce capacity and resize the operation for the 21st century. Sadly, that’s left only one plant fully within Detroit’s city limits — Chrysler’s Jefferson North Jeep plant. Chrysler’s headquarters are teeming with activity, but it’s located in suburban Auburn Hills, while Ford is based in Dearborn. Both close enough to matter, but neither necessarily helping Detroit’s tax base.

Detroit needs to diversify its economy, increase its density and figure out how to attract more people to live there. And it can be done. Just look at Pittsburgh. In the mid-1980s that city was home to 15 Fortune 500 companies. Then the steel industry collapsed in the first industrial meltdown as Japanese and Korean companies flooded the market with cheap metal. Pittsburgh’s legendary companies such as U.S. Steel, National Steel, Jones and Laughlin couldn’t withstand that heat. Like Detroit’s implosion, it was brutal and thousands of people got thrown out of work at once. You can’t close part of a blast furnace.

Yet Pittsburgh has bounced back—smaller and smarter if still scarred. It’s economic base was a bit more diverse than Detroit’s and it has found a lifeline in higher-end metal and medicine, as well as robotics, computer science and other high tech areas. In metals, the region regained its advantage by going upmarket, focusing on high value specialty steels as well as aluminum and titanium.

(MORE: Detroit: As the Governor Moves to Take Control, Residents Wonder What’s Next)

In medicine, the University of Pittsburgh Medical Center—which occupies what were the senior executive floors in the former U.S. Steel Building — became the region’s biggest employer. UPMC has made huge investments in Pittsburgh, but also exports its know-how to other countries. In technology, Carnegie-Mellon University has been a font of startups in computer science, robotics, and nanotechnology. The emerging field of biotechnology is a natural outgrowth for both of these institutions.

Pittsburgh has even benefitted from its limiting geography. It sits at the confluence of the Monongahela and the Allegheny rivers, which join to form the Ohio.  The Allegheny defines its northern border. The city jumps the Monongahela, but it’s quickly stopped by the coal-bearing hills that once fed its mills. The Monongahela Valley’s communities were hard hit, too, but they are not part of the Pittsburgh municipality. Detroit’s geographic sprawl of 139 sq. mi. (vs. Pittsburgh’s 58 sq. mi.) is one of its main issues, because density promotes efficiency.  Pittsburgh’s compact downtown core made redevelopment more efficient and more visible, even beautiful.

Michigan Governor Rick Snyder called the Detroit bankruptcy  “our opportunity to stop 60 years of decline.” Perhaps, but it won’t happen in a matter of months, or even a few years. The switch from a manufacturing economy to a mixed technology economy is difficult, because steelworkers or autoworkers can’t become tech workers overnight— or ever in many cases. In Pittsburgh, the process is still evolving. Consider that the downtown didn’t see a new office building constructed for about 20 years after the mid 80s collapse. And it still shares problems with many old northeastern manufacturing centers: huge pension and healthcare obligations, a smaller, older population, and pockets of poverty.

(MORE: Michigan: Its Own Worst Enemy)

Detroit might have a harder time pulling a Pittsburgh, or a Cleveland for that matter. It can’t claim any world-class universities that will develop the next wave of industry. It can claim a huge trove of industrial knowledge. The area’s tool and die shops, for instance, once employed the world’s best industrial craftsmen; but the automakers outsourced too much of this work in their desperation to cut costs. There’s still time to reclaim some of those industrial arts. There’s also hope that the melding of computer circuitry and controls with automotive design has created a demand for a new type of tool and die guy—an automotive software engineer or app developer. That’s an opportunity for one of Detroit’s schools, such as Wayne State, to become a bigger player.

Great Lakes industrial cities such as Pittsburgh and Cleveland have had the “benefit” of going to hell in an earlier era. Detroit is in a much deeper hole: $18 to $20 billion. But Detroit does have an auto industry that is roaring again, which should limit further erosion, and its relatively dense 7.2 sq. mi. downtown is already in rebuilding mode.  It has low-cost real estate and— once the bankruptcy winds it way through the courts— investors will have some clarity about future costs of doing business. There is a roadmap for the Motor City—if it can find a way to fund the trip.

MORE: Millennials Making a Difference in Detroit

7 comments
paleobear
paleobear

I bought three houses in the same neighborhood, one for me, one for my sis, one for my parents wih cash for a third of what my McMansion cost in Sacramento. Everyone found work quick. I was born in LA and lived 40+ years in California, and moved to the 'burgh in 2009. It has turned out to be a really good decision. Now its time to go fishing on the river, then tie up my boat at Point Park downtown for free, and have dinner. Then tomorrow over to see the antique car Grand Prix the huge, hilly Schenley Park near the university district. Things aren't perfect around here by a long shot, but ATI is building a new titanium mill, the oil companies big on a new gas cracking plant that will employ 10,000, even Yahoo is fishing for some 200 new techies at the universities, adding a new story to the 300,000 square foot old factory full of people they bought in the Bohemian strip district. And if in summer we get more that 5-6 days of 90+ weather its a shock. In winter just enough snow for Christmas and sledding. And the airport is easy to get in and out of if you need to snow bird fo a couple weeks. Even cats and dog, Republicans and Democrats seem to get along better here. Things are economical here because there never was a bubble, and home prices go up steadily 1-2% annually. I'd recommend to anyone that wants on the ground floor take a peek at the data. You can't go wrong moving to a city that was home to Mister Rogers and Gene Kelly.

Sibir_Russia
Sibir_Russia

Julius Fucik, “People, Be Vigilant”

the next major city-bankrupt the queue must be Chicago.

A very dangerous trend. To struggle with the budget deficit in Chicago are going to dismiss about 2.1 thousand teachers and other school employees. Today this decision took effect.. Previously it was reported that by the beginning of next academic year will be closed immediately 50 schools. Most schools are closed in disadvantaged areas populated by Hispanics and African Americans.

Elimination of such number of educational institutions will inevitably lead to the growth of crime.

Poor, poor, Chicago…

mary.waterton
mary.waterton

@paleobear 

You must work for the city council because you make life and job opportunity in Pittsburgh sound better than it really is.

manlyman
manlyman

The result of liberalism. Nuff said.

cjh2nd
cjh2nd

@mary.waterton  

or maybe he just had a positive experience. i'm from pittsburgh and got out as soon as i could, but i know many people that share his sentiments. there's a reason Forbes and Money magazines keep ranking it as one of the top 5 cities in the country.  


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