Long-Suffering Detroit Finally Turns to Bankruptcy

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  • DETROIT (AP) — At the height of its industrial power, Detroit was an irrepressible engine of the American economy, offering well-paying jobs, a gateway to the middle class for generations of autoworkers and affordable vehicles that put the world on wheels.

    But by Thursday, the once-mighty symbol of the nation’s manufacturing strength had fallen into financial ruin, becoming the biggest U.S. city ever to file for bankruptcy — the result of a long, slow decline in population and auto manufacturing.

    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 such as trash collection and snow plowing, which have already been slashed.

    Kevin Frederick, an admissions representative for a local career training school, called the step “an embarrassment.”

    “I guess we have to take a couple of steps backward to move forward,” Frederick said.

    Now city and state leaders must confront the challenge of rebuilding Detroit’s broken budget in as little as a year.

    Kevyn Orr, a bankruptcy expert hired by the state in March to stop Detroit’s fiscal free-fall, said Detroit 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.”

    The city’s woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, 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.

    Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn’t control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

    By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city.

    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 neighborhoods are practically deserted and basic services cut off in places. Looming over the crumbling landscape is a budget deficit believed to be more than $380 million and long-term debt that could be as much as $20 billion.

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