The writer, a Los Angeles freelancer, is a former Detroit News business reporter who blogs at Starkman Approved.
By Eric Starkman
The writer H.L. Mencken famously said: “No one ever went broke underestimating the intelligence of the American public.” Michigan Gov. Gretchen Whitmer and Ford Motor Co. last week proved a variation of that saying: “No one ever got bad publicity underestimating the gullibility of the Detroit-area media.”
As I was reading The Detroit News’ fawning coverage hailing plans for a “Transportation Innovation Zone,” what struck me as the only significant news of the ballyhooed “public-private partnership” was that Michigan is earmarking $126 million in taxpayer money to support the iconic train station’s redevelopment. That’s on top of the some $250 million of taxpayer money that was contributed for the renovations.
To create the appearance that the project was already generating results, Ford called in a chit with its Google partner to sprinkle some Silicon Valley pixie dust on the effort with the announcement that the multinational technology company has proudly become a “founding member” of Michigan Central.
“I think this is going to be a hub for research on all sorts of things that we can’t even envision as we sit here today, and I think we’d like to continue to build out the partnership and have others come in,” Google CFO Ruth Porat was quoted as saying.
Porat clearly does a lot of thinking. That’s why she gets paid the big bucks -- $51 million in 2020. So, what exactly is Google committing to as a founding member? It plans to open a lab to teach computer science to high school students and partnering with local nonprofits to offer a nebulous career certification program that Ford has agreed to recognize.
Oh, and the company will also provide cloud computing for the project.
I’m confident in speculating that Porat wasn’t visiting Detroit, especially this time of year, to announce a program that is of no business significance to Google. A more likely reason is that Ford and Google are planning something much bigger, expanding on their already significant relationship.
Ford and Google last February announced a six-year deal for in-car connectivity and cloud services that Ford CEO Jim Farley said was worth hundreds of millions of dollars. The announcement was a big deal for both companies because the arrangement allowed Ford to streamline its operations and eliminate jobs, while giving Google some credibility in the cloud computing business, an area where Amazon and Microsoft are kicking the company’s butt.
Ford’s stock popped this week after Bloomberg reported that the company plans to spend more on vehicle electrification and consider a partial spinoff of its EV business.
EV is all the rage on Wall Street, and Farley knows how to play to his audience. On a call to discuss Ford’s lackluster earnings, Farley told investors he was already running Ford’s EV businesses and internal combustion engine [ICE] businesses as separate companies.
“I’m struck at how different the rhythm of this digital BEV business is versus ICE, Farley said. “Running a successful ICE business and a successful BEV business is not the same.”
Never mind that Ford’s $2.0 billion quarterly operating income fell behind Tesla’s $2.6 billion.
A likely spinoff of Ford’s EV business spells big trouble for Michigan and Detroit. Rest assured Ford’s EV headquarters won’t be in Michigan. The company has earmarked more than $11 billion for EV manufacturing in Tennessee and Kentucky. Austin, where Tesla relocated its headquarters and where GM has its largest IT Innovation Center, is another possibility. Since 2009, GM has invested more than $2 billion in Texas, where it has 13 facilities and 9,000 employees.
Rivian, until recently another high-flying EV company in which Ford has an interest, relocated its headquarters to California from Plymouth more than a year ago, reportedly because CEO RJ Scaringe believed that being a Michigan-based company gave the company a stodgy image. Establishing an EV headquarters outside of Michigan would likely boost Ford’s stock, something Detroit’s media loves to crow about.
Eyes on India and Mexico
Ford has already signaled its plans to diminish its Michigan footprint. The company announced last September it plans a major expansion of its white-collar engineering, technology and business operations workforce in India, where it already has 11,000 employees.
Ford’s acclaimed EV Mustang is made in Mexico.
Get the picture?
The Michigan Central Depot announcement last week provided Whitmer cover for her inability to attract significant investment in Michigan, save for GM. Lacking any announcement of substance, Whitmer shamelessly slathered on meaningless PR pablum.
“Ford is an American icon that has left its mark on Michigan – and the world – for more than 100 years, and we are proud to partner with Ford and other founding members at Michigan Central to shape the next century of transportation solutions while reducing emissions and accelerating electrification,” Whitmer said Friday in a news release.
“By embracing a whole-of-government approach in our collaboration with Michigan Central and the city of Detroit, we are writing the playbook for a new kind of partnership that keeps Michigan at the forefront of mobility for generations to come. Together, we can continue growing Michigan’s economy, putting Michiganders first, and win the next century of auto manufacturing and technology development.”
Meanwhile, in Ohio . . .
Michiganders should take note of what’s going on in neighboring Ohio: Intel announced last month it plans to invest at least $20 billion to build two chip factories just outside Columbus.
The company said the site could be expanded to accommodate as many as eight chip factories, with Intel spending as much as $100 billion to build them. The initial two factories will employ 3,000 workers earning an annual average salary of $135,000. The project also is expected to create 7,000 construction jobs and 10,000 indirect jobs.
Intel has also pledged $100 million for Ohio educational institutions to ensure a pipeline of talent and support research programs in the region. Compare that to Google’s commitment to launch a coding school for high school students.
In yet another win for Ohio, fuel cell maker manufacturer Hyperion announced a few days ago it plans to relocate its headquarters to Columbus from California and open a 65-acre plant – the largest new factory in Columbus in over a decade. The factory is expected to create more than 680 jobs with an annual payroll of more than $58 million.
Hyperion CEO Angelo Kafrantaris is yet another person with Michigan ties who hightailed it out of here. He graduated from the College of Creative Studies in Detroit. Google co-founder Larry Page is a University of Michigan alumnus.
One can’t blame Farley for wanting to exit Michigan. The automotive industry has become more competitive than ever, and Ford needs to attract the best and the brightest and forge partnerships with companies around the world. In Tennessee, Ford can rely on the full support of the state’s leaders, including members of Congress. Dearborn’s Congressional representative is Rashida Tlaib, an internationally renowned antisemite who advocates a boycott of Israeli companies.
Ford and GM have critical research facilities in Israel, as does every major technology company.
What what he does, not says
Ford is so done with Michigan it didn’t even bother to meet with Whitmer to see if she could come up with a better deal than Tennessee offered. Farley recently told Crain’s Detroit Business that he “loves” Michigan, but actions speak louder than words.
Ford chairman William Clay Ford Jr. deserves credit for his Herculean commitment to Detroit, including spearheading the Michigan Central Depot redevelopment. But he can’t change the fact that Michigan is fraught with dismal leadership on both sides of the aisle.
The Detroit media’s Chamber of Commerce cheerleading journalism does their readers and viewers a great disservice. They stood idly by as former Beaumont Health CEO John Fox destroyed a once prominent and proud hospital system, and last week that company faded into oblivion. More companies will join Ford in the stampede out of Michigan.
The story that needs to be written is how can Michigan’s decline be reversed and who has the political smarts and capabilities to pull it off.
Whitmer has conclusively demonstrated she’s not up to the task.
Reach the writer at firstname.lastname@example.org. Beaumont employees and vendors are encouraged to reach out, with confidentiality assured.
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