Sat, Mar 16, 2013 - Page 15 News List

Bankruptcy expert to steer Detroit away from crisis


A bankruptcy expert who represented automaker Chrysler LLC during its successful restructuring has been chosen to steer Detroit out of its financial abyss.

The distressed city — once one of the nation’s most prosperous manufacturing centers — is now the largest US city to have its finances placed under state control.

Governor Rick Snyder announced on Thursday that he had chosen Kevyn Orr, a partner in the Cleveland-based law firm of Jones Day, to be Detroit’s emergency manager, a position that gives him broad powers to control all spending.

Detroit, which at one time was the symbol of US progress and held great political power thanks to the auto industry, has lost a quarter-million people during the last decade and remains saddled with a US$327 million budget deficit and more than US$14 billion in long-term debt.


It has been making ends meet on a month-to-month basis with the help of bond money held in a state escrow account.

The city also has instituted mandatory unpaid days off for many city workers.

“We can rise from the ashes,” Orr told a news conference. “This is a beautiful city and a wonderful state that gave me my start. I feel compelled to do this job.”

His selection was formally approved later by Michigan’s Emergency Loan Board.


The emergency manager will have wide-ranging authority to mend the city’s budget, including renegotiating labor contracts, selling off assets and even suspending elected officials’ salaries.

A state-appointed review team previously determined that because of Detroit’s cash deficit, the city would have had to either increase revenues or decrease expenditures — or both — by about US$15 million per month for three months starting in January to “remain financially viable.”

Those troubles, along with underfunded city services such as police and fire departments and the absence of legitimate turnaround plans from Mayor Dave Bing and the City Council, ultimately forced Snyder to appoint an emergency manager.

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