Three Michigan business leaders say the state’s former bloated cost structure has been transformed, and the state is now increasingly competitive on a global basis.
Painful years of retrenchment and restructuring have produced prosperous companies and institutions now able to compete with anyone, they said.
At American Axle and Manufacturing, CEO Richard Dauch said the key was turning labor agreements negotiated by major automakers into more flexible arrangements, while never cutting research and development even in the worst of times.
“I told the staff if you cut one penny out of R&D you are gone,” Dauch said. “Now, 92 percent of our products have been designed within the past five years.” Dauch also said his restructuring “made sure 100 percent of employees added value or they were gone.”
Detroit Medical Center CEO Mike Duggan said the key was the DMC’s 29-minute emergency room guarantee. He said that changed a company culture that he called “learned helplessness.”
“This group had lost $500 million in five years and none of its was their fault,” Duggan said. “I learned that a fellow on the west side of Detroit who slices his hand won’t go three miles to Sinai-Grace Hospital, he’ll go farther to a suburban hospital because he has to wait three hours to see a doctor at Sinai-Grace. The key was the 29-minute guarantee. That got us focused on all our gross inefficiencies, and got away from the conversation that it’s all someone else’s fault.”
For Charles “Chip” McClure, chairman and CEO of Meritor Inc., it was a relentless focus on earnings before interest, taxes and depreciation and free cash flow. He said he met monthly in person with his board of directors, and learned bad news is more palatable if given in person.
“I announced a salary cut the week before Christmas for a reason,” he said. “The message was, ‘save some of your bonus, it’s going to be a touch year.’… People like good news, they don’t necessarily hate bad news, what they hate is no news.”
Duggan also gave credit to Gov. Rick Snyder for being blunt about the state’s financial reality.
“The single biggest thing we want the state to do was what we had to do, face reality as it is, not as we wish it would be,” Duggan said. “Coleman Young, one of the smartest guys I ever met, once said there was nothing wrong with Detroit that four or five more auto plants wouldn’t fix. I wondered how a guy that smart could be kidding himself. Whether or not you agree with all the steps Snyder has taken, and we may all have reservations about certain individual decisions, the single greatest thing he has done is forced the people of this state to think, ‘This is where we are, this is what we can afford.’”
Duggan said the DMC now has 500 jobs open and that “there is a mismatch between what is coming out of the schools and what our needs are.”
Dauch also said he believed deep reforms are still needed in an educational system he said was rooted in an agrarian culture, and that Michigan’s thousands of units of local government are grossly inefficient.
But Dauch also said there’s hope — his company just added 480 jobs at a plant in Three Rivers that’s now supplying everyone from Volvo to Mack to Fiat to General Motors to Chrysler.