"The problem is not free trade ... we have not cared for the displaced worker," McCain said at a town hall meeting at Oakland University, north of Detroit.
"Innovation is here in the great state of Michigan - the birthplace of the modern automobile industry," he said. "Of course, the old kinds of doing business (are) not coming back. But the new innovation and new technology and green technology that will both eliminate our dependence on foreign oil as well as greenhouse gas emissions is right here in the state of Michigan."
His message was more nuanced than when he said before Michigan's Jan. 15 primary that "there are some jobs that aren't coming back to Michigan." Michigan has seen the loss of more than 300,000 manufacturing jobs since mid-2000 and still struggles with a 7.2 percent unemployment rate - the nation's highest.
More than 20 protesters stood outside the Shotwell-Gustafson Pavilion chanting, "Outsource McCain." Some carried anti-war signs, while others criticized McCain's support of free trade agreements.
"Out of John McCain, we're seeing a lot of talk about workers and education and investment but we're not seeing a plan to implement change," Michigan Democratic Party spokeswoman Liz Kerr said after the event.
Democratic presidential candidatesand have threatened to pull the U.S. out of the North American Free Trade Agreement, known as NAFTA, or renegotiate it to push for more protections for workers and the environment.
NAFTA expanded trade among the U.S., Canada and Mexico, eliminating most tariffs on a wide range of products from agriculture to cars to computers.
McCain's appearance came the day after Obama and Clinton competed in the North Carolina and Indiana primaries. McCain is the certain Republican nominee and has been running a general election campaign for weeks.
Noting that Michigan raised income tax rates last year, McCain said he supports lower taxes to stimulate economic development. He pointed to the example of Alabama, where numerous automobile and manufacturing plants have located in the past decade.
He also voiced his support for a new federal law mandating increases in the corporate average fuel economy - or CAFE.
A question about it came from a retired General Motors Corp. worker, who said the legislation couldn't have been worse for his company than if it had been written by its Asian rivals. He seeks a "more rational solution" to conserving gas.
"We have to increase CAFE standards," McCain said, adding it should no longer be a financial burden since the Detroit Three automakers reached national agreements with the United Auto Workers last fall that reduced automakers' costs and "put them on a much more level playing field with foreign competitors."
The questioner persisted: "Have you ridden in a Chevrolet Suburban? Are we evil for making large cars?"
"No sir," McCain replied. "I believe that ... with technology and with improvements we can make with alternate fuels and hybrid cars and eventually other means of technology, the best brains in the world reside in the state of Michigan in the automotive industry and we can compete with anybody in the world."
Warren resident Richard Zalewa, who brought photos taken with McCain during his last swing through the state and asked McCain to sign them Wednesday, said he recently took an early buyout from a large corporation that he declined to name. He agrees with McCain on the need to retrain workers, particularly those older than 50.
"If we don't retrain, we're throwing away valuable resources," he said. "It's like we're in a throwaway society if you get a little gray hair. ... Employers don't want to speak with you."
McCain was also asked about concerns over his temper, reports CBS News' Dante Higgins.
"How dare you ask that question?" McCain joked.