OT: Detroit files for bankruptcy
Feel free to lock this thread (would probably be a good idea), but it will be posted ad nauseum if it's not up.
Detroit has filed for bankruptcy.
http://finance.yahoo.com/news/detroit-emergency-manager-files-bankruptcy-201540926.html
Can't say I'm surprised. Probably should have happened years ago. Detroit is a shell of its former glory.
Kwame was a great mayor who shouldn't be in jail
As a native (but no longer a resident) of the city of Detroit I find everything about this sad. I find the situation the residents are in sad, I find the inevitable mocking and finger point sad, and I find the fact that many people simply will not care sad. Detroit is full of great people who deserve better, let's hope that years from now we point back on this moment and say this is when it started.
that have been sent to Mexico and China
The fusion won most dependable mid size just last year.
There was never a technology difficiency. There were execution and cost problems. Much of this was due to the fact CAFE regulations forced the big three to sell small vehicles at a loss and the transplants had a $1200 per vehicle advantage in labor because govt officials from TN, AL, etc. allowed them to age discriminate when opening plants. The transplants have not had to bear the retirement or union wage burdens of the big three. The earliest transplants are just now starting to retire workers. I could go on and on, but technology has nothing to do with it.
There was never a technology difficiency. There were execution and cost problems. Much of this was due to the fact CAFE regulations forced the big three to sell small vehicles at a loss and the transplants had a $1200 per vehicle advantage in labor because govt officials from TN, AL, etc. allowed them to age discriminate when opening plants. The transplants have not had to bear the retirement or union wage burdens of the big three. The earliest transplants are just now starting to retire workers. I could go on and on, but technology has nothing to do with it.
The age discrimination in hiring happened as well when Isuzu opened its assembly plant in Lafayette, IN. I was a grad student at Purdue and a few of my classmates worked part time interviewing applicants as the plant was being built. They talked about how the mindset was to hire the youngest applicants. They didn't do the actual hiring, but they were instructed to put different color tags on folders for applicants based on age.
The locals were buzzing about what great jobs these were and how a Japanese company was manufacturing vehicles in the US. They seemed not to understand when I pointed out it was an assembly plant and that the parts were made in Japan.
There was a bit of a kerfuffle when it turned out the location for the plant was on a stretch of road called the Bataan Memorial Hwy, but the city and/or county basically did back flips to out bid other US municipalities with building infrastructure and offering tax breaks to entice Isuzu, and a little thing like renaming the road wasn't going to stand in the way.
It may be a "tired meme" but reports backed by statistical data (these reports are also audited as required by the insurance companies as they are the ones who determine rates on vehicle service contracts) show that American made cars break down far more often than Toyota, Honda and Hyundai. It's sad, but it is the absolute truth.
back to what made this country. not the welfare state, that's like handing crack out but worse. help the truly needy without limit, help the truly lazy to get a job and don't enable their sloth. no more baby mama's and baby daddy's.
Danger, Will Robinson. Back away from the thread.
somewhere(?) online that in fact Flint is even harder hit than Detroit in many respects. IIR, the article stated that Flint has lost nearly 50% of its population since it peaked just short of 200,000 in 1960; worse yet, it has lost over 85% of the auto industry jobs (mostly GM) since its heyday back then, down from over 80,000 jobs then to now somewhere around 8800. I've never lived in the Detroit or Flint areas myself, but have several friends that grew up in both those areas back in the late 60's thru the 80s, so I consider myself somewhat informed about those cities. Obviously the biggest single factor that dragged down both towns is lack of economic diversity (too tightly tied to the auto factories); in contrast, the GR metro area, including the city of GR itself (where I grew up) is thriving in comparison, thanks to a very diversified economy/job market.
Can either city ever come back though? To some extent, I think Detroit can and will, there are too many signs of life downtown for the entire city to collapse, but unless better paying jobs return and neighborhoods are revitalized, it's only gonna be a very limited comeback. Flint, on the other hand? Now there's a tough case. I only know two people personally who live currently in metro Flint, and they both firmly believe the city is dead and beyond resurrection.
for many many years has been "too big for it's britches". Too much infrastructure, not enough people. Bulldoze half of it, create farmland or grassy fields which require little to no maintenance and minimial, if close to, 0 tax dollars to support.
As a native (but no longer a resident) of the city of Detroit I find everything about this sad. I find the situation the residents are in sad, I find the inevitable mocking and finger point sad, and I find the fact that many people simply will not care sad. Detroit is full of great people who deserve better, let's hope that years from now we point back on this moment and say this is when it started.
It's so bad I apparently felt the need to repeat myself
While Jon Hamm is my favorite actor on TV right now and I love Mad Men, that joke last night at the ESPYs about Detroit was uncalled for.
But I did laugh at that joke. If you can't laugh at yourself (I am a Canadian but as you should be able to tell, love America) than who can you really laugh at? Other than staee and Ohio fans
I don't know who wrote that monologue, but between that comment and the thoughts on going to college with catholic girls they clearly were looking to push some buttons.
With the steady creep of people starting to take residence in urban areas, the big thing Detroit has to do is incentivize a return of the middle class. In a way, you can kind of picture the city's population as a kind of stock market crash. When things started to erode, the bottom dropped out more, which caused a lot of people to flee. The only thing that can solve this is an influx of residents that would stabilize the economy. I'm not sure how and if that can be done.
consider moving in or do so. They move out when they have kids or their kids reach school age.... With notable exceptions, everyone with the means to get out eventually does so. Very very sad. Maybe there's oil under the salt formation?
that is the case with a lot of urban cities in the northeast. The cities themselves have some nice areas, but the school districts suck and so people move to the burbs.
But on the bright side, when you've hit rock bottom you've got nowhere to go but up.
Look at the firm involved . . . Jones Day. If anyone had any questions about the cost of a bankruptcy filing, wait until you see the fee applications that get filed each month. The heads of residents of Detroit and general unsecured creditors are going to explode! You'll learn why work to avoid bankruptcy filings at all costs is done. Some constituents apparently didn't learn this lesson already.
For any of you that work at Miller Canfield: Get assigned to at least some part of this case! Its a career-maker. You all will never see a bankruptcy case as "glamorous" as this one in any of your life times. The Chrysler and GM cases were huge but this is something entirely different, especially if you're representing the debtor.
Are you implying that the cost of litigation/settlement is going to exeed the cost Detroit residents would have paid in the long run?
If you are, you are wrong.
Sure it will cost an arm and a leg in the upcoming months/years, but it will eventually pay for itself tenfold.
Just ask United Airlines...
I have a feeling that the bankruptcy associates at Miller Canfield aren't going to have any billing issues over the course of the next year.
CooperLily, you're in-house in D.C., right? FedGov?
Sometimes the responsible thing to do is file for Bankruptcy. I'm not going to pretend I know much of the finanical/economy/etc. fields nor am I a Detroit resident (nor Michigander). I'm not sure if this is the low point or if the "low" point has already taken place or if it's still to come (hopefully one of the former) but at one of these points the only way to go is up. I'm blabbering a bit but again, from what it seems, it can only get better up there and maybe this is a pitfall that is necessary for that to happen.
Not a lawyer, but have done some bankruptcy work...
I think that is the gist of it. The twist comes on whether a state court could have issued an injunction against filing bankruptcy. Pension funds asked a state court for an injunction barring the city from filing BK. That may have been able to block the city from doing so, although I strongly suspect that a Federal court would rapidly overturn that injunction. You can't have state courts blocking access to Federal courts, and Federal courts trump state courts.
If nothing else, it provided the city with a great cover story to file for bankruptcy. They seem to meet the tests for filing (they appear insolvent since they missed a payment to the pension funds and they had at least some "good faith" negotiations, although both points will be challenged in bankruptcy court).
I agree with you, though similar suits had already been filed by retirees, employees and others. It is speculation on my part, but the Retirement Board's action may have forced the EFM's hands here. There is actually an interesting federal supermacy issue here. Michigan's Constituion has a provision (Art. 9, Section 24) which protects accrured financial benefits of public pension systems. The Retirement Board was reportedly claiming that the Constitution prohobited the bankruptcy filing as the City will liklely try to reduce (or eliminate) the pension obligations through Chapter 9. The EMF's team obviliously wanted this to be fought out in bankruptcy court rather than state court. This is a very serious issue since the public sector pensions are not (to my knowledge) backed by the PBGC.
it seems like a pretty weak argument from the pension funds. Donovan v City of Dallas pretty clearly laid out that state courts cannot enjoin access to Federal courts. It was individuals seeking access and not a municipality in that case, but it gets cited for all sorts of access decisions. Text is here: http://supreme.justia.com/cases/federal/us/377/408/case.html
On PBGC: you are absolutely right, no protection for public sector pensions.
So the question I am very interested in is whether the state somehow has responsibility for the pensioners' benefits, per the same provision in the (Michigan) constitution you cite:
The pension boards probably had a weak legal case - but a good political one if they got in front of the right state judge (who is elected).
I don't think the retirees can make the state back the pensions. The City of Detroit is a separate legal entity. There are separate pensions systems in most municipal entities in the State. (There are some exceptions - teachers for example.) IMHO, it would be a real reach to argue that the state is responsible. However, I am sure that all other Michigan cities, townships, villages, etc. would love to have the State of Michigan back there pension systems.
Of course, this is all fairly uncharted ground.
No other option when you have the combination of debt and lack of revenue Detroit faces.
Detroit will go down as one of the tragic and also instructive stories of faliure. A epic failure of bankrupt idealogy that failed the very people it was supposed to serve. I hope that new leadership in the future will serve the people far better and bring them hope for more prosperity in the future, they deserve it.
...the whole city? Is that even possible?
God bless my city, but WTF are we doing?
An enormous county has done it before, so why not Detroit!
In all actuality, this is a good thing. It smarts in the short term, but filing bankruptcy will give the City a fresh start.
Provided the discussion can remain civil, the thread can stay. It is a relevant and quite major event to a fair number of MGoBloggers who live and work in metropolitan Detroit or in Detroit itself.
For those interested, here are the actual filing papers - (LINK) - which summarize what will be the major points of discussion in the coming hearings undoubtedly, most notably $18 billion in accured obligations and the demonstrated inability to raise revenue even with taxes at state-mandated maximum limits.
Interesting how the pension funds have filed suits this week also. Huge unfunded pension and HC liabilities and a poor and shrinking tax base. The city is in a world of hurt. If someone on here does BR work, I'd be curious as to how this pension matter is going to work....purportedly 3.5 billion. Where will the money come from? Hopefully not the taxpayers.
I'm a bit rusty but the PBGC (Pension Benefit Guarany Corporation) exists to ensure that pensions get paid. Technically, the City (if the court grants the order for relief and allows the bankruptcy case to continue) can move to reject the pensions at which time the PBGC will step in and take over. However, this is an incredibly messy thing and I bet the City won't try to mess with the pensions. They would alienate so many people by doing so.
There is an unfunded pension liability of 3.5 billion. Where would the money come from? The only manner in which that much money could be raised would be for the state to have a gigantic tax increase either in personal income, sales or property tax at levels that would be painful to say the least. I'm not sure the rest of the state would feel terribly inclined to help out barring massive concessions, the state constitution which may guarantee payment notwithstanding.
Detroit = Greece.
State of Michigan = Germany.
PBGC covers private employers under ERISA plans. It doesn't apply here. I am not 100% on this, but I don't thinnk there is any backing for the public sector pension plans. Maybe the banckruptcy court could set up a fund to pay benefits like the PBGC?
Even if the courts were to provide protection, the bigger problem is where would the revenue come from to fund the pension plans and, presumably, healthcare, the delivery of which isn't getting any less expensive.