The gut-punch of Detroit in bankruptcy

In 2009 I landed in Detroit and saw a billboard I’ll never forget. I was on my way to FMA's ALAW, the Advanced Laser Applications Workshop, and there was a massive billboard advertising something you rarely if ever see on the interstate. Metal fabricator W Industries was touting its ability to serve sectors like heavy industry and, especially, defense. The implication was clear: Welcome to Detroit; we’re not just the Motor City.

Like Detroit, W Industries succumbed to bankruptcy. As sources told Crain’s Detroit Business in 2011, “the story of W Industries is a classic case of a family-owned business that assumed too much risk too quickly in pursuit of higher revenue and profits.”

The company’s rise and demise shows how reality just doesn’t work like a clean, logical, feel-good storyline. W Industries used to be almost totally reliant on Ford Motor Co., but worked to diversify beyond automotive. Although Detroit seemed to be a one-industry town, W Industries certainly wasn’t going to be a one-industry company.
Of course, no matter how diversified a customer base is, debt is still debt, and too much of it can kill a company, regardless of how healthy it seems to be from the outside.

When Detroit declared bankruptcy earlier this month, it felt like a slow gut-punch, one that everyone knew was coming. “Detroit” and “manufacturing” are often uttered in the same breath, and it’s sometimes difficult to think of one and not think of the other.

Many pointed to the fact that the city went down because it relied too heavily on one sector. It didn’t diversify, and so it fell from grace.  Like W Industries’ tale, I believe Detroit’s story is far more complex. Bad luck and timing played a role. So did mismanagement. The overreliance on one sector is just one piece of the puzzle.

Certain automotive plants and (especially) R&D facilities still thrive outside the city. My Rolodex is still full of cards with 248 and 734 area codes. The manufacturing talent base around Detroit remains tremendous, though like most in the area, they live and work outside the city.

If customers leave—as those in Detroit have done—you lose income, and your problems increase. But even if a company has a healthy customer base and market diversity, none of it matters in an entity full of wasteful and risky practices. If any organization fails to address waste, it will fail altogether eventually. It’s just a matter of time.