Mackinac Island — Michigan is barreling toward one of the biggest changes in its economy since Henry Ford created the moving assembly line a century ago.
But can the state that helped put the world on wheels capitalize on the coming convergence of its bedrock auto industry and a high-tech sector that is symbolized by Silicon Valley and beloved by Wall Street far more than the Detroit auto industry?
“We’re more or less making a billion dollars a month and not getting any credit for it,” General Motors Co. President Dan Ammann said in an interview, punctuating the absurdity of the predicament with a chuckle. “We’re building something that never existed today. There’s no company that I know of that has all the pieces to win here.”
No state does, either, though Michigan has a lot of them. It’s the intellectual heart of the U.S. auto industry. It boasts more engineers per capita than any other state. It claims three top research universities. It hosts an auto supply base producing industry-leading technology for self-driving vehicles and connected cars.
Four macro-trends are colliding at the same time: the push for self-driving, or autonomous, cars; renewed interest in electrified powertrains; connectivity enabled by the internet and wireless technology; and growing interest in ride-sharing and car-sharing, both of which have major implications for how many vehicles automakers sell, to whom and for what price.
“In the next five years the industry will change more than it has in the last 50,” says Rob Huber, vice president of innovation and ventures for Faurecia North America, a supplier of seating, emissions controls, interiors and exteriors. “It’s something we’re trying to get our arms around.”
The fear is that a divided Michigan will miss the opportunity to exploit the change arriving with remarkable speed. That’s why industry CEOs, civic groups, politicians and higher education leaders this week should use forums like the Detroit Regional Chamber’s Mackinac Policy Conference to coalesce around a broad strategy to stake its claim in the convergence of the auto and tech sectors.
“We are in a prime position here as a state and as an industry to take control of our destiny,” says Matt Simoncini, CEO of Lear Corp., the Southfield-based global supplier of seats and interior systems. “We’ve got a hub of something that really can be built upon.”
Silicon Valley sees “the huge opportunity. The auto industry is the biggest industry in the world, and it’s a growth industry. That’s why they want in. It’s going to interact with your home, your community. It’s going to change the way we live our lives, frankly.”
That’s probably true. The convergence should be the impetus to rethink everything: Should the Detroit auto show become more technology show and less car show? Should engineering programs at the University of Michigan and Wayne State be more focused on producing research and expertise in autonomous technologies? Should the state rethink its economic development incentive programs with an eye to attracting startups and next-stage companies in the autonomous space?
However much the long-running crises of Flint’s lead-tainted water and Detroit’s public schools meltdown consume policymakers and the news media, how and whether Michigan can position itself in the converging sectors and retain the necessary talent is critical to future job growth and investment.
It needs to happen quickly.
“Technology is happening faster than anyone thought, and the integration of that technology in the vehicle is happening faster than anyone thought,” says Doug Rothwell, CEO of Business Leaders for Michigan. “We have a lot going for us in the current world. The question is whether we’ll be able to compete in the future world.”
The signals are mixed. Michigan’s ability to attract talent remains challenging. Academic achievement is declining, in many cases at or near the worst in the country. Detroit’s public schools are failing. In business, record North American earnings for GM and Ford Motor Co. aren’t moving share prices — a clear signal that investors want more than good performance in the cyclical car and truck business.
That the autos understand. Ford is expanding its presence in Silicon Valley and creating its own “smart mobility” company to be headed by former Steelcase Inc. CEO Jim Hackett. GM invested $500 million in Lyft Inc., the ride-sharing company; acquired Cruise Automation and its autonomous driving expertise for a reported $1 billion; established a new car-sharing brand, Maven. And Fiat Chrysler Automobiles NV will provide Google Inc. with minivans for autonomous vehicle development.
A new package of bills in the Michigan Legislature would enable the state’s roads to be used to test autonomous vehicles, an effort to create a welcoming eco-system for the new technology. Google is establishing a site in Novi for testing self-driving vehicles. State and federal officials, with support from the automakers, are proposing to build the American Center for Mobility at Willow Run Airport.
“This is the most disruptive technology since the car came off the moving assembly line,” says U.S. Sen. Gary Peters, D-Bloomfield Township. “We need to focus on it because it is moving so quickly.”
He co-founded the Smart Transportation Caucus with Sen. Corey Gardner, R-Colo. He’s lobbying Obama administration officials for standardized regulations. He’s backing a push to create a national test site for autonomous vehicles, many of which could be developed at the Willow Run facility should it become reality.
The situation is fluid. The technological prowess of Google and Apple Inc., beloved by investors, is no guarantee of success in the quest to field cars and trucks that can drive themselves — and their passengers — safely. Automakers can build safe, solid, fuel-efficient vehicles at a rate of millions per year, but engineering them to drive themselves is still the stuff of product development studios and controlled tests.
“Everyone is learning from each other — a lot,” says GM’s Ammann. “It’s very much a two-way street. What everyone’s learning is what everyone’s doing is really hard. As much as we want to be at the front of the line, we think Michigan should be at the front of the line, too. We want to see this change embraced here in Michigan.”
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.