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20th century

In 1903, Henry Ford founded the Ford Motor Company. Ford's manufacturing—and those of automotive pioneers William C. Durant, Horace and John Dodge, James and William Packard, and Walter Chrysler —established Detroit's status in the early 20th century as the world's automotive capital. The growth of the auto industry was reflected by changes in businesses throughout the Midwest and nation, with the development of garages to service vehicles and gas stations, as well as factories for parts and tires. Because of the booming auto industry, Detroit became the fourth-largest city in the nation by 1920, following New York City, Chicago, and Philadelphia.

In 1907, the Detroit River carried 67,292,504 tons of shipping commerce through Detroit to locations all over the world. For comparison, London shipped 18,727,230 tons, and New York shipped 20,390,953 tons. The river was dubbed "the Greatest Commercial Artery on Earth" by The Detroit News in 1908. The prohibition of alcohol from 1920 to 1933 resulted in the Detroit River becoming a major conduit for smuggling of illegal Canadian spirits.

With the rapid growth of industrial workers in the auto factories, labor unions such as the American Federation of Labor and the United Auto Workers (UAW) fought to organize workers to gain them better working conditions and wages. They initiated strikes and other tactics in support of improvements such as the 8-hour day/40-hour work week, increased wages, greater benefits, and improved working conditions. The labor activism during those years increased the influence of union leaders in the city such as Jimmy Hoffa of the Teamsters and Walter Reuther of the UAW.

Detroit, like many places in the United States, developed racial conflict and discrimination in the 20th century following the rapid demographic changes as hundreds of thousands of new workers were attracted to the industrial city. The Great Migration brought rural blacks from the South; they were outnumbered by southern whites who also migrated to the city. Immigration brought southern and eastern Europeans of Catholic and Jewish faith; these new groups competed with native-born whites for jobs and housing in the booming city.

Detroit was one of the major Midwest cities that was a site for the dramatic urban revival of the Ku Klux Klan (KKK) beginning in 1915. "By the 1920s the city had become a stronghold of the KKK", whose members primarily opposed Catholic and Jewish immigrants but also practiced discrimination against Black Americans. Even after the decline of the KKK in the late 1920s, the Black Legion, a secret vigilante group, was active in the Detroit area in the 1930s. One-third of its estimated 20,000 to 30,000 members in Michigan were based in the city. It was defeated after numerous prosecutions following the kidnapping and murder in 1936 of Charles Poole, a Catholic organizer with the federal Works Progress Administration. Some 49 men of the Black Legion were convicted of numerous crimes, with many sentenced to life in prison for murder.

By 1940, 80% of Detroit deeds contained restrictive covenants prohibiting African Americans from buying houses they could afford. These discriminatory tactics were successful as a majority of black people in Detroit resorted to living in all-black neighborhoods such as Black Bottom and Paradise Valley. At this time, white people still made up about 90.4% of the city's population. White residents attacked black homes: breaking windows, starting fires, and detonating bombs.

In the 1940s the world's "first urban depressed freeway" ever built, the Davison, was constructed. During World War II, the government encouraged retooling of the American automobile industry in support of the Allied powers, leading to Detroit's key role in the American Arsenal of Democracy. Jobs expanded so rapidly due to the defense buildup in World War II that 400,000 people migrated to the city from 1941 to 1943, including 50,000 blacks in the second wave of the Great Migration, and 350,000 whites, many of them from the South. Whites, including ethnic Europeans, feared black competition for jobs and scarce housing. The federal government prohibited discrimination in defense work, but when in June 1943 Packard promoted three black people to work next to whites on its assembly lines, 25,000 white workers walked off the job. The 1943 Detroit race riot took place in June, three weeks after the Packard plant protest, beginning with an altercation at Belle Isle. A total of 34 people were killed, 25 of them black and most at the hands of the white police force, while 433 were wounded (75% of them black), and property valued at $2 million (worth $30.4 million in 2020) was destroyed. Rioters moved through the city, and young whites traveled across town to attack more settled blacks in their neighborhood of Paradise Valley.