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The return of Detroit?

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The return of Detroit?

U.S. automakers are making money, paying back debts and beating Japan at its own game

  • Downtown Detroit, seen from Windsor, Ontario.
    Wigwam Jones/FlickrDowntown Detroit, seen from Windsor, Ontario.

Detroit is an easy target for anyone looking to skewer the city as some kind of Motown-meets-Mogadishu.

The story is, of course, an old one.

There are the persistently high crime and murder rates, its history of violent race relations, the urban wasteland created by 33,000 empty homes and — in a newly depressing twist featured in this week's Dateline NBC program — the local blues musician who shoots racoons and sells their meat to the city's poorest residents.

Underscoring this mess is the tragedy of Detroit's auto industry, for decades the heartbeat of the U.S. economy but today a wrenching symbol of manufacturing decline.

So it was encouraging to hear the news out of "The D" this week, my hometown. And, no, I won't make any apologies for expressing a bit of economic optimism.

The biggest came from General Motors, which paid off the last of its $8.2 billon in emergency loans owed to the U.S. and Canadian governments.

More importantly for workers, G.M. said it was investing $136 million in its Fairfax, Kan., plant that makes Chevrolet Malibus and Buck LaCross sedans. It's also putting $121 million into its sprawling Detroit-Hamtramck plant that manufactures the Volt, Chevrolet's promising electric car.

The moves won a verbal high-five from U.S. Treasury Secretary Timothy Geithner, who helped engineer the company's government bailout last year:

“We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability. This continued progress is a positive sign for our auto investment — not only more funds recovered for the taxpayer but also countless jobs saved and the successful stabilization of a vital industry for our country.”

Even Chrysler, which also accepted a government bailout last year, said it turned an operating profit of $143 million in the first quarter. The company, now owned by Italy's Fiat, says it's on track to break even for 2010.

Meanwhile at Ford — the Big Three automaker that didn't take any government aid — sales jumped 43 percent in March and 37 percent for the quarter. Ford reports first quarter earnings results Tuesday and those, too, are expected to be strong.

In addition to this bit of much-needed financial stability in Detroit, we saw another important development this week: a shift in consumer perception.

According to an Associated Press-GfK poll, more Americans now believe Detroit makes better-quality vehicles than Toyota, Honda and Nissan: 38 percent said U.S. cars are tops, while 33 percent of Americans prefer Asian vehicles.

Toyota's global recall of 8 million vehicles — coupled with rampaging Fordzilla — has a lot to do with that shift. And things got even worse for the Japanese giant this week after the ratings agency Moody's downgraded Toyota's credit rating amid concerns that the recall — and possible litigation — will hurt it down the road.

But Detroit's improving quality image is part of a longer trend. It's the result of paying more attention to building vehicles that, like those of their Japanese and German rivals, actually work. The strategy is clearly paying off.

So what does all of this mean for the city's problems?

Any stability in its main economic engine is good news, of course. Detroit has struggled for decades, but the place turned downright bleak as the global economic crisis deepened last year. Residential property prices plummeted, the commercial real estate sector tanked and those key economic ingredients — consumer and business confidence — took major hits.

So any news that might help boost economic prospects and spirits is a welcome development, not only for Detroit, but also for the U.S. economy as a whole.

But longer term, Detroit's problems may be too deep for any one industry to solve, even one so important as the auto business.

That's because the city has failed to sufficiently plug itself into the global economy. Yes, the Big Three were among the first U.S. companies to globalize. They remain key players in markets worldwide, even with their latest problems.

But Detroit — unlike New York, Chicago, London, Paris, Frankfurt, Hong Kong, Tokyo and other global cities — lacks true economic diversification. It's not a churning hub of financial markets that helps facilitate capital and investment. It doesn't have the quality of life needed to attract, and retain, global talent and brains.

Instead, in a shrinking world where people, governments and companies are in direct and increasing competition, Detroit has a terrible image problem — true or exaggerated — that a few days or weeks of good news from the auto industry won't change.

And yet the pieces are all there, still.

The city has a skilled, ambitious and well-educated workforce. It has a strong entrepreneurial spirit, fed by world-class creative and artistic talent. It even has a new government that seems committed to reform, while fighting back against the recent PR nightmares like the Dateline story on the racoon killer.

So motor on, Detroit. And the best news: it's still five months until the Lions are forced to return to Ford Field.

This article originally appeared on GlobalPost.

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