Indian Automaker’s Plant Is Latest Sign of Detroit Comeback

By Bill Vlasic | November 22, 2017

It has been years since Detroit, birthplace of the U.S. auto industry, was a steady producer of the manufacturing jobs that defined it as the Motor City. But its comeback is entering a new phase.

The latest milestone came Monday, with the announcement of the area’s first new vehicle assembly plant in 25 years. And the automaker making it happen is from, of all places, India.

The company, the Mumbai-based Mahindra Group, said it would begin producing off-road recreational and work vehicles at the plant, in Auburn Hills, early next year. And it indicated that this might be just a first step in its ambitions for the U.S. market.

“None of us really know where this journey will take us,” said Rick Haas, chief executive of Mahindra’s North American auto group. “But we are here to expand Mahindra’s auto business in the U.S.”

Moreover, the company’s chairman, Anand G. Mahindra, is taking a cue from another automotive entrepreneur, Elon Musk. Citing the success of Musk’s electric-car startup, Tesla, he said the traditional barriers to automotive success had been obliterated.

“How many people told Elon Musk, ‘You don’t have any hope of getting into the car business’?” he said.

Mahindra is a major producer of cars and trucks in India and South Korea, but until now it was mainly known in the United States as the world’s leading maker of tractors. Mahindra said Detroit was a focal point for growth for the company’s U.S. businesses, which also include manufacturing electric bikes and scooters.

“We have a responsibility to contribute to the resurgence of Detroit,” Mahindra said at the plant’s opening ceremony. “That means jobs, and that means investment.”

While the planned production volume pales in comparison with the output of large, mainstream auto plants, the factory underscores that the Detroit area is again attracting automotive investment.

The region is still a prime source of engineering talent and manufacturing know-how, as well as a technology incubator for electric cars and self-driving systems. Mahindra already has a design and engineering center in Troy, half an hour north of Detroit, that turns out prototypes of future vehicles.

Other foreign companies have also made big investments in the Detroit area and throughout the upper Midwest. Chinese firms have bought a former General Motors steering-gear division in Saginaw, Michigan, and an automotive glass plant in Moraine, Ohio. One of the largest auto suppliers in Detroit is the Indian firm Sakthi Automotive, which is expanding its operations into a long-shuttered high school on the city’s hardscrabble southwest side.

Detroit’s mayor, Mike Duggan, has made rebuilding the city’s depressed industrial base a priority, and last year lured the auto-parts supplier Flex-N-Gate — owned by a Pakistani native, Shahid Khan — to construct a $95 million factory near downtown.

“It’s the kind of development that Detroit has not been able to compete for in recent years,” Duggan said at the plant’s groundbreaking last year. “But we are starting to compete now.”

Mahindra’s footprint in the Detroit area is small so far, with $230 million invested in the plant, the technical center and two related operations that employ about 270 people combined. The Auburn Hills site where the company is building its factory, in Detroit’s northern suburbs, had been empty for years after housing an engineering firm.

The company expects to build about 5,000 off-road vehicles in the plant’s first year, then add capacity to more than double the volume.

By comparison, the last full-scale plant constructed in Detroit — a Fiat Chrysler factory that opened in 1992 — makes more than 300,000 Jeeps annually.

Mahindra also assembles tractors at several U.S. plants and employs about 3,000 workers overall across the United States, part of a worldwide workforce of more than 200,000.

If Mahindra aims to make the leap in the U.S. market from tractors and off-road models to cars or sport-utility vehicles, it has several options.

Mahindra builds and sells its own branded SUVs and pickups in its home market and elsewhere in Asia, and could import variations of those vehicles into the United States. It also owns the South Korean carmaker Ssangyong Motor and the Italian design and engineering firm Pininfarina, both of which could participate in producing models for the U.S. market.

Still, analysts foresee a tough challenge for any new entries into the hypercompetitive U.S. auto market. After two consecutive years of record sales, demand has slipped in 2017. Moreover, automakers like General Motors, Volkswagen and Toyota are broadening their product lineups with both conventional gasoline-powered models and new electrified vehicles.

“It will be an uphill battle for Mahindra,” said Michelle Krebs, a longtime analyst with the firm Autotrader. “Tesla has done a brilliant job building a new brand, but it’s very expensive to do that.”

Yet it is hardly surprising that Mahindra has chosen to put down roots in Detroit to help it achieve its ambitions of becoming a player in the U.S. market.

“This is where the expertise is for building vehicles,” Krebs said. “You’ve got the talent here and the suppliers, and it is the center of excellence for so much of the industry’s research and development activities.”

Manufacturing employment in the Detroit area declined substantially during the recession, which crippled auto sales and forced GM and the former Chrysler to seek government bailouts and bankruptcy protection to survive. According to the Bureau of Labor Statistics, manufacturing jobs declined nearly 40 percent in the metropolitan area from 2005 to 2009, and have yet to bounce back completely.

But the revival of the overall market for new vehicles, as well as the return of the Detroit car companies to financial health, has spurred a steady comeback for auto jobs — particularly in the high-tech sector supporting advances in autonomous driving and electric vehicles.

And while the Detroit area is studded with empty lots that once had factories, the Mahindra plant is a promising sign of blue-collar jobs on the horizon. The company expects to add another 400 jobs in the area by 2020, investing an additional $600 million — and to continue to be a factor in the auto capital’s resurgence.

“It is great to be part of this comeback story,” said Rajan Wadhera, president of Mahindra’s global automotive business. “We have a long and profitable and mutually beneficial relationship ahead of us.”

© New York Times