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Chrysler's hometown tries to retool

With the automaker in deep trouble, Auburn Hills, Mich., wants to diversify out of the car business. For one thing, it's hoping to become a medical Main Street.

January 24, 2009|Ken Bensinger

AUBURN HILLS, MICH. — There's little question this is a company town.

The 15-story Chrysler world headquarters is the tallest building for miles, towering over a 486-acre corporate campus on the western edge of the city. Police cruise in Dodge Chargers developed with the automaker. The city manager drives one too, and his wife gets around in a Dodge minivan. City Hall is a converted country estate built by John Dodge's daughter.

At night, fewer than 20,000 people go to bed here, but during the day, when Chrysler is at work, the population soars to nearly 60,000. Last fall, when Chrysler was rumored to be in merger talks with General Motors, panicked city officials issued a news release to calm public nerves.

With good reason: When Chrysler shuts down, so do local businesses. After all, nearly all their customers work at the automaker.

This month, Chrysler was on mandatory furlough as the suffering company tried to cut costs and production on the heels of receiving $4 billion in emergency government loans.

The Dilly Deli, desperate for business, kept its doors open during the monthlong furlough. At lunch on a recent Friday, a lone customer nibbled on a tuna sandwich. In the town center, many retail spaces are vacant; those that are open have few if any customers.

"Yeah, we're pretty dependent on that one company," said Tom Alter, an executive at a local credit union. "But look around. I think it's inevitable that Chrysler is going to play a much smaller role around here. We've got to get out of the auto business."

Auburn Hills, like most towns in Michigan's Oakland County, was built on cars.

Housing the offices and factories of automakers and the myriad suppliers who make components for them, this region grew rich off the assembly lines of Henry Ford, Alfred P. Sloan and Walter P. Chrysler.

Even today, the county is the nation's fourth wealthiest, home to some of the nation's toniest suburbs and towns like Bloomfield Hills, where auto executives in palatial mansions have driven the median household income to nearly $200,000 a year.

The top employer in the county is General Motors Corp.; Chrysler is No. 3. In Auburn Hills, 7 of the top 10 employers are in the automotive industry. Chrysler leads the way with more than 10,000 workers at its headquarters. The company contributes $1 of every $7 the city collects in property tax, about $4 million annually.

But with the auto industry in deep trouble, unemployment is rising rapidly, and property values are crashing.

Last year, for the first time in memory, tax collections declined here, said Auburn Hills City Manager Peter Auger. That's in big part because of reassessments of the Chrysler headquarters (requested by the carmaker) that have lowered its value by $160 million in the last two years.

The city's $66-million budget this year is down 18%, and Auger has ceased filling empty jobs. A recent report suggested that if Chrysler were to go out of business, the office vacancy rate here would shoot overnight to 62% from just 3%.


It's a familiar story, played out in the slow death of steel-mill towns, logging towns and shipbuilding towns across the nation. But local officials believe that Auburn Hills is different, that it can somehow erase the Chrysler Pentastar inscribed in its DNA and reinvent itself.

"I'd like to position ourselves to help lead Michigan out of the recession," Auger said. "We can survive this."

The key, officials say, is to wean Auburn Hills from the automobile, luring new types of business to this suburb, a half-hour's drive north of Detroit and perhaps best known as home to the Detroit Pistons basketball arena.

Trumpeting incentive packages, skill retraining programs, business incubators and the fact that it has no municipal corporate or income tax, Auburn Hills wants to bring in financial services, healthcare and high-tech companies to foster start-ups and encourage expansion of educational institutions.

"Since the second World War, we've been pretty comfortable having all our eggs in just one basket," said L. Brooks Patterson, Oakland County's longtime executive, holding up a list of 10 new industries to focus on for growth. "We've got to diversify."

Next year Auburn Hills will take a big step in that direction, when Oakland University and Beaumont Hospital open a medical school in town. It's a project that will cost $100 million over 10 years, but when it's finished, it will bring about $1 billion to the local economy every year.

The goal is to make Auburn Hills and the surrounding area a destination for top-tier medical care in the mold of Minnesota's Mayo Clinic or the Cleveland Clinic. Patterson calls the project a "medical Main Street" and says it could create 45,000 jobs countywide in the next decade.

"This will bring pharmaceutical companies, biotech, new housing, new residents," said Virinder Moudgil, who as senior vice president for academic affairs and provost at Oakland University oversees the medical school. "The impact is tremendous."

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