I – Strengths
Strength 1: Detroit receives freighters from more than 100 world ports
The Detroit River is a 24-mile long river and one of the busiest rivers in the world and receives freighters from more than 100 world ports (Detroitmi.gov, 2014). This is a long-term asset the city of Detroit has since it connects Lake Michigan, Lake Huron, St. Lawrence Seaway and Erie Canal. During the first half of the 20th century during Detroit’s rapid industrialization, the river became polluted but in recent days much effort has been put to restore and conserve the river. According to a study, 150,000 jobs depend on the river crossings and its pretty much guaranteed that the river would be useful for ...view middle of the document...
Weakness 2: Poor financial plan
According to the Detroit Emergency Manager, the city is insolvent because “it continues to incur expenditures in excess of revenues despite cost reductions and proceeds from long-term debt issuances – it is clearly insolvent on a cash flow basis” (CNBC, 2013). Operating expenses have been rising and exceeding revenues by about $100 million a year since 2008 (CNBC, 2013). Its debt is getting even bigger and with the way the city is performing they will not get out of bankruptcy any time soon; they need to build a new financial plan. The long-term debt is killing Detroit; it should be renegotiated or restructured if the city is to be put on the path to a sustainable future.
III – Opportunities
Opportunity 1: New arena project
A 650 million dollar investment in a new arena will create approximately 5,550 jobs in the city of Detroit during construction and about 1,000 jobs permanently (Detroitnews.com, 2014). The arena plans to host many more events than the Joe Louis Arena does (another arena in city of Detroit), including games for its local hockey team as well as concerts and other crowded events. It will help the Detroit economy in terms of real estate because it will help bridge the gap between midtown and downtown by stabilizing property prices and increasing it as a whole over a larger region.
Opportunity 2: New for-profit farms
One of the richest men left in Detroit, John Hantz, has an idea of creating land scarcity by converting the abundant empty pieces of land into a large-scale for-profit farm. This is a great opportunity for the city of Detroit because according to Hantz, “it will restore big chunks of tax-delinquent, provide decent jobs with benefits, supply local markets and restaurant with fresh produce, attract tourists from all over the world, and most importantly, stimulate development around the edges as the local land market tilts from stultifying abundance to something more like scarcity and investors move in” (Whitford, 2009). It’s a great opportunity because with land prices dropping it makes it more possible to succeed in the farm business plus it will hopefully add diversification to the city’s assets.
IV – Threats
Threat 1: Higher minimum wage
The minimum wage has been raised from $7.25/hour to $10/hour, a big increase (Detroitnews.com, 2014). Most of the times the minimum wage increase hurts the economy because it tends to help the low class but not the high class. The high class are the most responsible for the economy so if it doesn’t help the high class, the economy of the city of Detroit will probably not get any better. However, studies show that sometimes the minimum wage raise helps to pump up the economy temporarily and get a bit more cash flow.
Threat 2: Sale of electric and hybrid vehicles jumped 84% over the last year
Detroit’s competition in the motor industry has been getting even tougher. Its competitors Toyota, Tesla and Nissan have been leading in electric...