Monday 23 October 2017

Detroit files for massive bankruptcy after years of struggle

The abandoned 3.5-million-square-foot Packard car plant in Detroit.
The abandoned 3.5-million-square-foot Packard car plant in Detroit.

Corey Williams and Ed White Detroit

Detroit, the once-mighty symbol of America's manufacturing strength, has now become the biggest US city ever to file for bankruptcy.

Governor Rick Snyder said yesterday that the bankruptcy process would allow for improvements to the city, with a greater emphasis on public safety and other city services.

He said it also should offer a more certain path for creditors, who don't know how much or whether they will be repaid.

Although the filing had been feared for months, the path that lay ahead was still uncertain. Bankruptcy could mean laying off employees, selling off assets, raising fees and scaling back basic services, which have already been slashed.

Kevyn Orr, a bankruptcy expert hired by the state in March, said the city would continue to pay its bills and employees.

But, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild's San Francisco office, "they don't have to pay anyone they don't want to. And no one can sue them".

LURED

The city's woes have piled up for generations. In the 1950s, its population grew to 1.8 million, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers started building suburbs that lured away workers and businesses.

In the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn't control crime. Imports from Japan started to cut the size of the US auto industry.

By the time the auto industry melted down in 2009, only a few factories were left.

Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.

The result is a metropolis where whole neighbourhoods are practically deserted. Looming over the landscape is a budget deficit believed to be more than $380m (€290m) and long-term debt that could be as much as $20bn (€15bn).

Detroit has more than double the population of the Northern California community of Stockton, which had been the largest US city ever to file for bankruptcy in June 2012.

Irish Independent

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