Detroit files Chapter 9 Bankruptcy

[Go Skins]

http://www.freep.com/article/20130718/NEWS01/307180107/Detroit-files-Chapter-9-bankruptcy-amid-staggering-debts

 

 

The City of Detroit filed this afternoon for Chapter 9 bankruptcy protection in federal court, laying the groundwork for a historic effort to bail out a city that is sinking under billions of dollars in debt and decades of mismanagement, population flight and loss of tax revenue.

 

The filing begins a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.

 

Detroit emergency manager Kevyn Orr, who in June released a plan to restructure the city's debt and obligations that would leave many creditors with much less than they are owed, had warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.

 

Gov. Rick Snyder would have to sign off on the filing. A spokeswoman did not immediately return telephone calls today.

 

Orr’s spokesman Bill Nowling would not confirm today that the filing is imminent. However, he said, “Pension boards, insurers, it’s clear that if you’re suing us, your response is ‘no.’ We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents.”

 

 

[CincyInDC]

I had never seen a boarded-up skyscraper until I went to Detroit to see the Reds play the Tigers.

[|Lucid|]

I had never seen a boarded-up skyscraper until I went to Detroit to see the Reds play the Tigers.

 

Detroit has some of the most amazing architecture I have ever seen.

 

True story. The first time I went to Detroit it was for a party (rave) that was being thrown in an abandoned warehouse in the old industrial district (this is where RoboCop was shot for the post-apocolyptic like city scapes... There was no stage craft needed for these locations).. I had fallen asleep during the ride and when I opened my eyes I was greeted by this post-industrial hell hole complete with a burning car husk (I mean it was literally still on fire).  I felt like I had somehow been transported into some sort of futuristic hell zone after the fall of civilization.

 

It was pretty bad ass, and made the music sound better - no doubt.

[Jamie_B]

This is entirely stupid, it is not possible for a government to go bankrupt, your being fooled so that they can sell off public assets to private interests.

[|Lucid|]

This is entirely stupid, it is not possible for a government to go bankrupt, your being fooled so that they can sell off public assets to private interests.

 

I was wondering about that.. As far as I know this has never happened?  Or did New York City do it a while back? Can't remember....

[Jamie_B]

 

I was wondering about that.. As far as I know this has never happened?  Or did New York City do it a while back? Can't remember....

 

 

It's happened before, but I call BS on it, in the past states borrow from the feds when money is an issue, I'd imagine cities can do the same from the state. I dont trust this at all, I see it entirely as a way for public assets to be sold off to private interests.

[|Lucid|]

 

 

It's happened before, but I call BS on it, in the past states borrow from the feds when money is an issue, I'd imagine cities can do the same from the state. I dont trust this at all, I see it entirely as a way for public assets to be sold off to private interests.

 

I share your suspicions... I am pretty pissed about the parking meter measure here in Cinci.. Short sighted at best, at worst it's a complete sellout of public interest for private/personal gain.

[Jamie_B]

 

I share your suspicions... I am pretty pissed about the parking meter measure here in Cinci.. Short sighted at best, at worst it's a complete sellout of public interest for private/personal gain.

 

 

Not familiar as I dont live there, but I know my cousin who is a cop was ranting about this on FB...

[scharm]

Cincinnati should by the fist momument or whatever that is, M&M's trailor and Barry Sanders likeness

[|Lucid|]

Cincinnati should by the fist momument or whatever that is, M&M's trailor and Barry Sanders likeness

 

:lol:

 

I'm partial to this one

It's the Joe Louis monument:

 

[scharm]

 

:lol:

 

I'm partial to this one

It's the Joe Louis monument:

 

 

Yeah.   We need that in front of PBS and rename it the Fist of Paul Brown. 

[Jamie_B]

 

Yeah.   We need that in front of PBS and rename it the Fist of Paul Brown. 

 

 

Or put some money in it's hands and call it the Fist of Mike Brown.

 

 

:ninja:

[|Numbers|]

http://washingtonexaminer.com/flashback-obama-boasted-in-2012-we-refused-to-let-detroit-go-bankrupt/article/2533249

 

Flashback: Obama boasted in 2012: ‘We refused to let Detroit go bankrupt’

 

On October 13, 2012, President Obama boasted to Americans in his weekly address that he refused to “let Detroit go bankrupt.”

 

“[W]e refused to throw in the towel and do nothing,” Obama said. “We refused to let Detroit go bankrupt, I bet on American workers, and American ingenuity and three years later that bet is paying off in a big way.”

 

Of course Obama was referring to the auto industry – alluding to Mitt Romney’s unfortunate New York Times op-ed headline from 2008.

 

With the news of Detroit filing for bankruptcy today, his line takes on new meaning.

 

 

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&

 

Let Detroit Go Bankrupt

By MITT ROMNEY
Published: November 18, 2008

 

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

 

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

 

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

 

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

 

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

 

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

 

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

 

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

 

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

 

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

 

Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.

 

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

 

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

 

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

 

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

 

 

"...three years later that bet is paying off in a big way..."

 

Less than one year after that statement, how is that bet paying off ?

[|Lucid|]

http://washingtonexaminer.com/flashback-obama-boasted-in-2012-we-refused-to-let-detroit-go-bankrupt/article/2533249

 

 

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&

 

 

"...three years later that bet is paying off in a big way..."

 

Less than one year after that statement, how is that bet paying off ?

 

Wasn't "Detroit" in this instance really just an analogy for the auto industry and not a direct reference to the city itself?

[|Elflocko|]

 

Wasn't "Detroit" in this instance really just an analogy for the auto industry and not a direct reference to the city itself?

 

Yes

[T-Dub]

They've just recently started to clean up the long-abandoned Michigan Central Station. Hopefully that continues as that Corktown neighborhood has started to see things turn around some.. That goes for much of downtown & Eastern Market as well.  It's still the only US city where you're going to see abandoned skyscrapers but that also means you can't find urban real estate that cheap anywhere else. It's led to an influx of hipster "urban pioneer" types as well as a few larger corporations (Quicken Loans being one of the most touted) which is bringing some life back to the central city as well as providing amusement for the residents in the form of ironic faux-Amish with handlebar mustaches on unicycles. I'd say the city overall had been slowly moving in the right direction after building Comerica & bringing the casino to Greektown etc.. 

 

Considering how bad things were there previously I share suspicion of the motives behind declaring bankruptcy now.

 

Here's some reaction from those local corporations via Forbes:

 

http://www.forbes.com/sites/joannmuller/2013/07/18/why-business-is-cheering-detroits-bankruptcy/

 

Forgotten Detroit website with all those abandoned skyscrapers:

 

http://www.forgottendetroit.com/

 

& a photo of Michigan Central

 

[|Bunghole|]

 

Wasn't "Detroit" in this instance really just an analogy for the auto industry and not a direct reference to the city itself?

But isn't that part of the problem with Detroit? It had for years scared away other industries from coming their with the clout of the unions of the Big Three Automakers. Detroit was Motor City. It was what kept it going. There was little incentive for intellectual advancement, other industries, etc as the people that lived there were largely bred to work in the auto industry. And when it tanked....well, you have what we have now. Tons of empty suburban housing and business buildings. I read somewhere that Detroit has lost 50% of it's population in 10 years. That is astounding! 

 

 

That article Numbers posted by Mitt Romney wasn't wrong. In fact, I think it's the most sensible thing I ever heard Mitt say.

[|Lucid|]

But isn't that part of the problem with Detroit? It had for years scared away other industries from coming their with the clout of the unions of the Big Three Automakers. Detroit was Motor City. It was what kept it going. There was little incentive for intellectual advancement, other industries, etc as the people that lived there were largely bred to work in the auto industry. And when it tanked....well, you have what we have now. Tons of empty suburban housing and business buildings. I read somewhere that Detroit has lost 50% of it's population in 10 years. That is astounding! 

 

 

That article Numbers posted by Mitt Romney wasn't wrong. In fact, I think it's the most sensible thing I ever heard Mitt say.

 

But it's not really relevant.. Obama wasn't talking about saving Detroit from "bankruptcy".. And as Ted has mentioned. anyone who goes there will tell it's looking better there than it has in a long time.. Curious timing to say the least.  I think I am with Jaimie when he says he is suspicious this is all a guise to sell off public assets.

[|Bunghole|]

 

But it's not really relevant.. Obama wasn't talking about saving Detroit from "bankruptcy".. And as Ted has mentioned. anyone who goes there will tell it's looking better there than it has in a long time.. Curious timing to say the least.  I think I am with Jaimie when he says he is suspicious this is all a guise to sell off public assets.

How is it not relevant? Detroit is starved for tax dollars from a lack of revenue from the corporations that still reside there and from it's de-population of people. Maybe I'm missing your point. My point is that since the US Auto industry is in a state of catharsis in terms of what they have to pay their unionized workers, their legacy costs, what they have to charge in order to turn a profit on a car...Detroit isn't getting the revenue stream from the auto industry it once enjoyed. Couple that with de-population, a lack of enticement for businesses that aren't auto related to make their corporate headquarters there as well as a colossal level of corruption at the political city management level andthis is what you get. It's sad but I'm not sure Detroit has any other choice. It can barely maintain it's basic essential services. Schools are closed and stand empty everywhere. Tracts of suburbs have empty homes. Tons of empty skyscrapers. It's sad.

 

Watch this: http://www.imdb.com/title/tt2125490/

 

Or read this: http://www.amazon.com/Detroit-An-American-Autopsy-ebook/dp/B008EKOP1I/ref=sr_1_1?ie=UTF8&qid=1374243150&sr=8-1&keywords=detroit+an+american+autopsy

 

These problems with the city are multi-faceted. Race, corruption, failed socialistic policies, a blameless city government, the decline in auto manufacturing in the city and other factors all combined to create this hot mess.

[|Lucid|]

How is it not relevant? Detroit is starved for tax dollars from a lack of revenue from the corporations that still reside there and from it's de-population of people. Maybe I'm missing your point. My point is that since the US Auto industry is in a state of catharsis in terms of what they have to pay their unionized workers, their legacy costs, what they have to charge in order to turn a profit on a car...Detroit isn't getting the revenue stream from the auto industry it once enjoyed. Couple that with de-population, a lack of enticement for businesses that aren't auto related to make their corporate headquarters there as well as a colossal level of corruption at the political city management level andthis is what you get. It's sad but I'm not sure Detroit has any other choice. It can barely maintain it's basic essential services. Schools are closed and stand empty everywhere. Tracts of suburbs have empty homes. Tons of empty skyscrapers. It's sad.

 

Watch this: http://www.imdb.com/title/tt2125490/

 

Or read this: http://www.amazon.com/Detroit-An-American-Autopsy-ebook/dp/B008EKOP1I/ref=sr_1_1?ie=UTF8&qid=1374243150&sr=8-1&keywords=detroit+an+american+autopsy

 

These problems with the city are multi-faceted. Race, corruption, failed socialistic policies, a blameless city government, the decline in auto manufacturing in the city and other factors all combined to create this hot mess.

 

The city is in trouble no doubt.. But that has been the case for decades now.. I'm not sure how letting the auto industry fail helps Detroit..  Things are getting better there at the time.. And the taxpayers are getting reimbursed for this.  As far as I can tell, of all the bailouts this one has been the most effective.  US cars are actually winning quality awards again, and building cars people actually want to buy.

[|Bunghole|]

 

The city is in trouble no doubt.. But that has been the case for decades now.. I'm not sure how letting the auto industry fail helps Detroit..  Things are getting better there at the time.. And the taxpayers are getting reimbursed for this.  As far as I can tell, of all the bailouts this one has been the most effective.  US cars are actually winning quality awards again, and building cars people actually want to buy.

 

True, I own a Ford, but it isn't enough. I do believe that the strength of the UAW helps to break the back of auto makers. There's too many people getting $30 an hour for work that doesn't deserve $30 an hour. And too many getting paid due to union regs to do nothing. 

[|kennethmw|]

True, I own a Ford, but it isn't enough. I do believe that the strength of the UAW helps to break the back of auto makers. There's too many people getting $30 an hour for work that doesn't deserve $30 an hour. And too many getting paid due to union regs to do nothing.

Wow, another example of the 30 dollar union bogeyman. The problem has never been the union, it's ALWAYS been the executives, but they have bullshitted you into believing that regular guys are the problem. It's the old crab fable, you have to cover the bucket when you have just one crab, but once you get two you're fine, because if one tries to get out, the second will pull his ass back down!

[|Elflocko|]

 

True, I own a Ford, but it isn't enough. I do believe that the strength of the UAW helps to break the back of auto makers. There's too many people getting $30 an hour for work that doesn't deserve $30 an hour. And too many getting paid due to union regs to do nothing. 

 

Lemme make something crystal fucking clear:  Horrific design and shit engineering did more to scuttle the Big 3 than any union.  Had the UAW gotten together and said "Let's destroy GM, Chrysler, and Ford!", they couldn't have done nearly the damage that the executives of those companies did with their own arrogance, greed, and incompetence. And this is coming from someone who was raised in a GM management family where "Fuck Unions" was part of the vernacular.  Even as a left-wing tree-hugging socialist I'm not a big fan of American unions, but they were maybe 10% of the problem

 

Do yourself a favor and get a copy of Delorean's 'On a Clear Day You can See General Motors' and see how things really went down... 

[|Bunghole|]

Wow, another example of the 30 dollar union bogeyman. The problem has never been the union, it's ALWAYS been the executives, but they have bullshitted you into believing that regular guys are the problem. It's the old crab fable, you have to cover the bucket when you have just one crab, but once you get two you're fine, because if one tries to get out, the second will pull his ass back down!

 

 

 

Lemme make something crystal fucking clear:  Horrific design and shit engineering did more to scuttle the Big 3 than any union.  Had the UAW gotten together and said "Let's destroy GM, Chrysler, and Ford!", they couldn't have done nearly the damage that the executives of those companies did with their own arrogance, greed, and incompetence. And this is coming from someone who was raised in a GM management family where "Fuck Unions" was part of the vernacular.  Even as a left-wing tree-hugging socialist I'm not a big fan of American unions, but they were maybe 10% of the problem

 

Do yourself a favor and get a copy of Delorean's 'On a Clear Day You can See General Motors' and see how things really went down... 

You guys don't think that unionized labor as it exists in this country didn't have a role in this Detroit debacle? I clearly stated that it wasn't the only problem....but was ONE of the problems.  Detroit labor has been outsourced. Even to other states within our country. If you don't think the Ford plant in Kentucky that has a more favorable union agreement to produce cars than the one that previously existed in Detroit then there's a problem. I'm NOT blaming the UAW for everything, But they are part of the issue here.

[|Elflocko|]

 

 

You guys don't think that unionized labor as it exists in this country didn't have a role in this Detroit debacle? I clearly stated that it wasn't the only problem....but was ONE of the problems.  Detroit labor has been outsourced. Even to other states within our country. If you don't think the Ford plant in Kentucky that has a more favorable union agreement to produce cars than the one that previously existed in Detroit then there's a problem. I'm NOT blaming the UAW for everything, But they are part of the issue here.

 

I am saying that you greatly overstate their impact in the overall scope of automotive history in the latter half of the 20th century.  

 

Had the Big 3 produced products that weren't pieces of shit and fuel efficient, demand would have existed for their products.  The unions struck to stay employed.  The problem was that the demand for the product they were producing was waning due to the shitty quality and dearth of features the customers desired.  The unions did fuck up demanding that capacity stay the same regardless of demand, but it was a catch-22 as the product they were producing was garbage because Big 3 management was out of touch with the wants and needs of their customers.

 

Had GM listened to Delorean and invested in the development of small, fuel efficient cars, Ford and Chrysler would have followed suit.  This would have made Toyota and Honda niche players in the automotive market as the Big 3 would have been ready for the oil embargoes and the Japanese would not have been able to get a foothold, much like the appliance segment.  They originally tried to build washing machines, dryers, and refrigerators, but Frigidaire, Maytag, and Whirlpool were so lean and efficient that they couldn't break in, so they went to the small car market.  The Big 3 were so fat, bloated, and arrogant that they said "Let them have the small car market!  What does it matter?".  The oil embargo hits, and they never recover.

 

Hindsight is a bitch, but trying to tie the downfall, or a least a majority of that downfall, on the unions is shortsighted and quite frankly wrong in the scope of the industry's history...