Carmakers smiling amid gloom of the Motor City

There was electricity in the air last week at America's biggest car show.

Detroit finally seemed to be on the move again, and the collapsing car capital put on its most upbeat show in years, the big three US manufacturers returning from the brink of destruction with confident launches.

Inside the giant Cobo Centre, amid the glitter and dry ice, the talk was of a brighter, greener future. Electric cars were everywhere. But outside the hall, the city still looks post-apocalyptic.

Like much of America's industrial heartland, Detroit has struggled to reinvent itself. The Motor City has a million fewer people living in it than it did in the 1950s; the latest US census shows Michigan was the only state to lose population in the past 10 years.

Crime is rampant. The local TV news followed updates on the car show last week with the latest on former mayor Kwame Kilpatrick who, with his father and others, is fighting corruption charges involving the city's sewerage contractors.

On the day the show opened, the BMW delegation had a US$140,000 ($182,800) 7-Series saloon stolen from outside its hotel.

But there are signs that the economic nadir may have passed. Ford, General Motors and Chrysler have downsized and refinanced, and are making profits as well as cars that people want to buy.

They are hiring again - GM intends to take on 1000 just to deal with the hybrid and electric cars on which many in the industry are pinning their hopes for the future.

But while US sales have picked up, reaching 11.5 million last year, and are set to rise again this year, they are still far below the 16 million-a-year sold before the recession.

The Centre for Automotive Research says 839,500 people were employed by the automobile industry in 2000, 226,200 of them in Michigan. In 2009, the US figure was 418,700 and Michigan's slice had collapsed to 81,600.

The interest in new technology and huge government subsidies means Michigan is picking up more jobs than rival states, says the director of the research centre's labour and industry group, Kristin Dziczek.

A US$25 billion federal investment in green technology that came before the crash is paying off, she says - on top of the 1000 electric engineers GM is seeking, Chrysler is looking for another 1000 and Ford for 750.

Dziczek says the investment has positioned Michigan well for the shift to electric vehicles and the growing importance of in-car technology.

"There is so much expertise in this area," she says. "But there's a Bruce Springsteen line, 'Those jobs are gone and they ain't coming back'."

Toyota's next big plant will open in Mississippi. Volkswagen has chosen Tennessee for its return to US manufacturing.

"Michigan took a hard hit. We've retreated to our core," says Dziczek.

Other US cities have faced similar crises and come through. Pittsburgh, once the US steel capital, is often cited as an example.

During that decade, unemployment hit 18 per cent, three times the national rate, and the area lost 80,000 jobs, says University of Pittsburgh law professor Mike Madison.

But these days, Pittsburgh's private sector is thriving. Madison praises far-sighted city officials who backed investment in education and medicine decades before the steel industry folded. Unemployment today is lower than the rest of the US.

The University of Pittsburgh Medical Centre employs 50,000 people, as many as US Steel once did. But Pittsburgh and Detroit are not necessarily comparable, says Madison.

"Detroit's problems today are not just the consequences of the auto industry, but of the race riots of the 1960s and 70s, of urban flight."

He says the "lattice" of Detroit's fabric has been destroyed, whereas "Pittsburgh didn't have that turmoil".

Speaking privately last week, senior car executives said that even with better times on the horizon, Detroit's future looked bleak.

The city has huge debts and a dwindling tax base. You can buy a house in Detroit for less than the cost of a new car. The trouble is, no one wants to.

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