Nobody reading this blog needs to be told how much trouble Detroit is in. Whether it's the Detroit Three, the city of Detroit, or the greater Detroit area, the story's the same: we're in trouble!
One of the very few events that provides positive media coverage for Detroit every year is the North American International Auto Show. I'd rate it as one of the top three auto shows in the world. It brings in thousands of members of the media, as well as executives from automakers and suppliers in Europe and Asia. They fill up every hotel for a 40-mile radius. Thanks to the exhibits that get built, the special events that are held, all the restaurant meals that are ordered and all the taxi rides needed to get around, the show brings in a half billion dollars of desperately needed economic activity every year.
The show is held in Cobo Hall, which was built in 1960. Everyone has known for years that it needs to be renovated and expanded, but that's going to take several hundred millions of dollars and the city is broke.
So it's taken years to carefully craft a deal that involves the governor, the state Senate and House, three different county executives, as well as the mayor and the city council of Detroit. But in a stupefying move at the 11th hour, the city council voted 5 to 3 to reject the deal.
John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.
Make no mistake about it, there are deep racial overtones involved in all of this bickering. Those rejecting the deal portray it as the evil white power elite swooping in to rob the poor black city of yet another one of its crown jewels.
Now, in case you don't know, the Detroit City Council has got to be one of the most inept, incompetent, dysfunctional and corrupt political bodies in the nation. Several council members and some of their aides are currently under investigation by the FBI for bribery, including Monica Conyers, the president of the council. She led the charge to kill the deal to renovate Cobo, claiming the city was getting a raw deal.
But what Conyers and her council cohorts conveniently fail to inform their followers is that Cobo Hall is a financial basket case. Every year it loses about $25 million in operating costs. The city still owes $110 million in bonds on the building, which also needs $200 million to pay for deferred maintenance costs. The deal to redo Cobo would take all this off the city's books.
Most of that deferred maintenance has to do with the electrical in the building. My sources tell me that under the Kilpatrick administration (that's the former mayor who went to jail involving yet another scandal) a contract was awarded to redo all the wiring in Cobo, but that the job was completely botched and has to be redone. (Oh yeah, I almost forgot to mention that the last two managers of Cobo pleaded guilty to bribes and kickbacks!)
This is why the deal to renovate Cobo involves taking it away from the city and letting an independent authority run it. My sources tell me that under the independent authority that $25 million operating loss could instantly be cut to only one or two million. A key reason: the authority would be free to fire and hire until they find the kind of people who will put in an honest day's work.
The whole place is out of control. I'm told that on a dollar-per-square-footage basis, Cobo is the most expensive convention center on the auto show circuit. That's not just comparing it to New York, Chicago or LA. It's more expensive than Frankfurt, Paris or Tokyo!
You want a chair in your display? That'll cost you $75. You want a table? That's a hundred bucks. That's not to buy them, that's just to set them up.
This is a key reason why most exhibitors hate dealing with Cobo. Automakers complain to me they feel like they're dealing with an enemy that barely tolerates doing business with them. There is no sense of urgency and the place is Exhibit A for its "can't do" attitude.
And so, exhibitors are voting with their feet. Porsche, Suzuki, Nissan, Infiniti, Mitsubishi, Land Rover, Rolls-Royce and Ferrari have all pulled out of the show. And it could get worse. Mercedes, BMW and VW are only committed for one more year – all thanks to our amazingly stupid city council.
Or mostly stupid, I should say. There are several thoroughly competent, honest council members who are doing their level best to help the city. We also have two solid candidates in the runoff to elect a new mayor. I'm pinning my hopes on them. Otherwise we can kiss the auto show goodbye.
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