Bankruptcy expert takes over running of Detroit

Friday 15 March 2013 23.07
Michigan Governor Rick Snyder appointed a bankruptcy expert to run Detroit
Michigan Governor Rick Snyder appointed a bankruptcy expert to run Detroit

Michigan Governor Rick Snyder has announced a state takeover of Detroit's finances.

He appointed a corporate bankruptcy expert who took a can-do attitude toward turning around the destitute US city, calling it the "Olympics of restructuring".

Kevyn Orr is a lawyer best known for his work on the restructuring of Michigan-based car maker Chrysler.

He said he hoped to avoid a bankruptcy filing by Detroit, something that would rank as the biggest municipal bankruptcy in US history.

"Let's get at it and work together because we can resolve this, people of good faith. Don't make me go to bankruptcy court," Mr Orr told a news conference, where he was introduced by Snyder and flanked by Detroit Mayor Dave Bing.

Mr Snyder's move amounts to the biggest state takeover of a US city in over two decades.

Mr Orr, who was officially approved by a committee of state officials yesterday, is expected to assume financial management of Detroit on 25 March.

As the emergency manager, he will supplant the authority of Detroit's elected officials, both the mayor and the city council.

Mr Orr will have broad powers, including the ability to renegotiate labour contracts, privatise services and sell certain city assets.

The dramatic move is the latest stage in the long decline of a city that was once the thriving centre of the US car industry and the birthplace of Motown music.

Once the fifth largest US city, Detroit now ranks 18th with 700,000 people.

In addition to his work with Chrysler, for which he billed $1m in fees during the first year of the restructuring of the smallest of the three major US car makers, Mr Orr has other Michigan ties.

He received both undergraduate and law degrees from the University of Michigan.

The emergency manager will face the huge and controversial task of repairing the finances of a city in crisis.

Detroit has run operating deficits for nearly a decade, is starved of cash and facing a crushing burden of debt from commitments such as pensions and health insurance.

More than a third of Detroit residents are officially classified as living in poverty, and it has an unemployment rate of 18.2%, far above the US jobless rate of 7.7%, according to government figures.

Basic services such as street lights and police protection have broken down, and the city has suffered from mismanagement and political corruption.