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Oracle of Delphi

An Open Letter to General Motors Corporation

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An Open Letter to G. Richard Wagoner, Jr., Chairman and Chief Executive Officer, General Motors Corporation

From Randal Charlton, Executive Director of TechTown, the Wayne State University Research and Technology Park – www.techtownwsu.org – in Detroit, one of Michigan’s 16 high technology business incubation and economic development parks

November 21, 2008

Dear Mr. Wagoner:

Congress has asked you and the rest of the Detroit auto industry to come back by December 2 with a plan that can help your companies survive as well as serve the interests of the taxpayers.

Detroit was once the business heartbeat of America. Now, unfortunately, to some outside the state, it is almost a dirty word; so you face an enormous challenge in obtaining support from congress. Here’s a plan that can quickly reestablish Detroit and Michigan as an innovative leader in the economic recovery of the United States.

Your challenge, I believe, is to frame your December solution as an answer to our overall economic problems, not just a bailout of the auto industry. Members of congress and other recognize that the auto industry is shrinking and no matter how well you craft your industry recovery plan, jobs will continue to be lost and Michigan’s economy will continue to decline. Unemployment, currently hovering close to 9 per cent, is expected to increase. Under any scenario it may be challenging to sell the current inventory of cars at a profit let alone the next generation of fuel efficient vehicles which are likely to be high ticket items. Taxpayers may see more pink slips even if an electrifying new auto industry emerges.

So, Mr. Wagoner, I suggest you go back to Congress with a proposal that allocates only $20 billion of the $25 billion to the auto industry. The other $5 billion should be spent on a number of projects in Detroit and Michigan that will be, in effect, an insurance bet that Congress may find really appealing.

The $5 billion should be allocated as follows;

1. $1 billion to commercialize new products and industries from technology that has been developed in the auto industry but could be spun out to other industries.

2. $1 billion on Michigan’s life science industry.

3. $1 billion on refurbishing shuttered manufacturing facilities in Detroit to accommodate new industries from overseas.

4. $1 billion develop alternatives to fossil fuels.

5. $500 million to developing technology related to the world’s most precious resource- fresh water

6. $500 million to commercialize new technology that is emerging from Michigan’s universities.

The fact is that underneath all the red ink and despair emanating from Detroit and Michigan, the state and the city has been building, over the last several years, an effective infrastructure that can put this $5 billion to work immediately to create new jobs. The organizations and systems are in place to manage these funds, measure performance and be accountable for the results. The auto industry has supported this effort.

Let me make just one point in support of each of these budget items:

1. $1 billion on auto industry spin outs.

The auto industry has a treasure trove of technology that can be applied to other industries such as medical devices, the plastics industry, public health and green technology. We have two companies at TechTown doing just this but at the moment this technology is largely sitting on the shelf while the auto industry understandably focuses on survival.

2. $1 billion on life sciences

Back in 1999, then Governor Engler committed to investing $1 billion in building a life science industry over 20 years. Progress has been made. For example all drug companies need biological samples to discover and test new drugs. We are building a world center of biobanking excellence at TechTown in Detroit.

3. $1 billion on refurbishing buildings for overseas companies.

We cannot replace the job losses in the auto industry fast enough with new business start-ups. Therefore we have to attract established businesses from overseas. Our Governor has been traveling the world to persuade high tech companies to locate in Michigan from countries such as Sweden, Japan and Israel.

At TechTown we recently signed an agreement with the Mexican government to bring high tech companies to Detroit. Over 20 companies have arrived and more want to come – from China, India and Eastern Europe. We can provide low cost facilities for these industries in the dozens of sturdy empty buildings that exist in Detroit. Many of these facilities are actually owned by the auto industry and are currently a useless asset. And the foreign workers will be attracted by the fact that we have some of the most inexpensive homes for sale in the western world.

4. $1 billion on alternative energy.

In Michigan we have enough wind to make T. Boone Pickens take a deep breath. Governor Granholm has made the challenge of harnessing wind and other sources of energy a key part of her recovery program. At TechTown, the state has a well-established research facility – called NextEnergy – that is supporting the development statewide of everything from alternative fuels to new ways of harnessing the abundance of wind in Michigan. I do not need to remind you the auto industry is supporting much of this work.

5. $500 million on clean water technology.

We are on the edge of the Great Lakes, which constitute one-fifth of the world’s fresh water. As everyone knows, life does not exist without water. Earlier this year the respected Brookings Institute set out a detailed case for the next United States president to focus on establishing America’s leadership in clean water technology. At Wayne State University, the University of Michigan and elsewhere in the Detroit region, important work is being done that can lead to new ways of making the best use of this precious resource.

6. $250 million on commercializing new technology.

Plenty of well managed funds have been established elsewhere in Michigan in recent years but they lack the necessary capital to back all the good ideas that are flowing from Michigan’s universities. At TechTown, for example, we have companies in life sciences, educational services and spin outs from the auto industry that could grow quickly with additional funding.

A fund of funds has recently been established in Detroit and a respected director appointed. He could quickly put $250 million to work.

Finally $250 million should be invested in developing the business incubator programs to support new business start-ups. Over the last several years the state has poured resources into establishing TechTown and fifteen other business incubators to nurture new companies based on new technology. We have a team of professionals working to provide assistance in all aspects of business development and they are backed by a growing team of former executives of the auto industry and elsewhere who serve as valuable mentors to our fledging entrepreneurs.

Mr. Wagoner, you might remind Congress that while he was still a senator, President-elect Barrack Obama recognized that most new jobs are created by new companies and he introduced a bill to provide support to business incubators across the country. We can help our new president and the country discover the next Google or the cure of cancer.

Mr. Wagoner, as you make your case, I suggest you emphasize that your plan will solve a much larger problem. Back in May at the 2008 annual economic conference run by the Detroit Regional Chamber, economic experts presented detailed analyses to show how other states across the nation had recovered from economic troubles. In summary the experts said it doesn’t matter whether states are hot or cold, east, west, north or south, economic recovery must include a major effort on the largest city. In our case that is Detroit.

You should also point out that the building where TechTown is creating new life, energy and jobs was once owned by General Motors. You generously gave it to Wayne State University, and the university, with help from the city, the state and Michigan foundations, has already joined you in beginning the process of diversifying the economy and driving Detroit in a new direction. One of your colleagues from General Motors sits on TechTown’s Board, and even in these challenging times is working hard to support our efforts to diversify the economy into areas that are important to the entire country.

Congress should know that you and your colleagues have a broader, higher goal than that of saving an industry under siege.

Yours sincerely,

Randal Charlton

Link: http://www.crainsdetroit.com/article/20081.../811239995/1079

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