News / USA

In Bankruptcy, Detroit Cedes Control, Gains a Respite

Detroit Emergency Manager Kevyn Orr addresses the media as Michigan Governor Rick Snyder listens during a news conference about filing bankruptcy for the city of Detroit in Detroit, Michigan, July 19, 2013.
Detroit Emergency Manager Kevyn Orr addresses the media as Michigan Governor Rick Snyder listens during a news conference about filing bankruptcy for the city of Detroit in Detroit, Michigan, July 19, 2013.
VOA News
By filing for bankruptcy, debt-ridden Detroit is buying itself some time to fix its finances, but it also is giving up financial control of its government and handing it to a federal judge.

Law professor Peter Henning at Wayne State University in Michigan said the judge, not the city's elected officials, will be making important decisions about the city's future.
 
"Really, what it is, it's a watershed moment because no longer is it just the emergency manager and the various constituencies in the city. Now it's under the power of the federal judge, and so the decision-making is really out of the control of the people who had a say in the process before," Henning said. "Now what you're talking about is a federal bankruptcy judge deciding who's going to get paid and how much they're going to get paid."

Watch related video by Mil Arcega:

Experts: Bankruptcy May Give Detroit Chance to Start Freshi
X
July 20, 2013 2:40 AM
Detroit, once the prosperous home of the U.S. auto industry, has gone bankrupt. It is the largest city in U.S. history to seek protection from creditors while it negotiates a plan to reorganize. Detroit's troubles reflect the loss of manufacturing jobs and much of its population and tax base. Despite legal wrangling over the filing, experts look at how Detroit's bankruptcy compares with other financially troubled municipalities. Mil Arcega has more for VOA.

Detroit calls itself the Motor City, the home of the American auto industry. But as Americans fell in love with foreign auto imports from Japan and Germany over the last 30 years, Detroit declined. Its population plummeted over several decades and many of its neighborhoods collapsed in decay and abandonment.

As the city's influence as an industrial center waned over the last half century, its elected officials mismanaged the local government, with one of its mayors sent to prison in a sex scandal. Now the city's debt stands at $18 billion or more.

A business and law professor at the University of Michigan, Erik Gordon, told VOA that the city is now paying for its misdeeds. "We had a mayor who was sent to jail, was sent back to jail. We had a city council that for many years was composed mostly of clowns," he noted. "We had a city that was living in fantasyland and that catches up with you. And it caught up with Detroit."

He said American automakers totally misread the allure of foreign-made cars, which over time diminished the city's standing as a symbol of American industrial muscle.

"I can remember when the first cars came over from Japan, and the Detroit automakers and the people in Detroit called those cars rice runners and said nobody will ever buy them," explained Gordon. "You know, times change and you have to face up and you have to compete. Detroit during the best of times got sort of fat and lazy and that's how you fall behind."

The Michigan academic said that by filing bankruptcy, the city will gain time to reassess its finances, although many creditors are unlikely to be paid anything close to what they are owed.

"The idea behind bankruptcy in America is a fresh start. So if you have a city or a company that you think is viable, that you think could go forward if only you get a little bit of a fresh start, you go into bankruptcy with a court-supervised procedure, actually specialized courts, bankruptcy courts, that act as referee, with special powers to get things settled, including some interesting powers to tell debtors that you may be owed $100, but you're only going to get $10," said Gordon.

He said he expects that Detroit will eventually emerge from bankruptcy as a renewed city focusing on the growth of technology businesses and less on its industrial past.

You May Like

Turkey's Controversial Reform Bill Giving Investors Jitters

Homeland security reform bill will give police new powers in search, seizure, detention and arrests, while restricting the rights of suspects, their attorneys More

Audio Slideshow In Kenyan Prison, Good Grades Are Path to Freedom

Some inmates who get high marks could see their sentences commuted to non-custodial status More

Ali Regained Title in Historic Fight 40 Years Ago

'The Champ' knocked Foreman out to regain crown he had lost 7 years earlier when US government accused him of draft-dodging and boxing officials revoked his license More

This forum has been closed.
Comment Sorting
Comments
     
by: Yoshi from: Sapporo
July 20, 2013 9:08 PM
I think if GM had pruduced more cars in Detroit and hired local workers, Detroid would have not been bunkrupted. Toyota is located in Nagoya city and a lot of citizens work for its car industries. Toyota is makng efforts to produce car parts inside Japan as much as possible eventhough it is expensive in wages compared with oversea production.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Victorious Secularists Face Challenge to Form Government in Tunisiai
X
Henry Ridgwell
October 30, 2014 11:39 PM
Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid