Friday, July 19, 2013

Like GM, bankruptcy can only help Detroit - Automotive News


July 18, 2013 - 4:45 pm ET
UPDATED: 7/18/13 5:23 pm ET

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Rick Wagoner said bankruptcy could spell the end for General Motors, because people wouldn't buy cars from a bankrupt automaker.

But GM ultimately did go bankrupt, and people still bought its cars. Four years later, GM is riding high again, posting healthy sales increases and generating billions of dollars in profits.

A quick trip through bankruptcy court let the company finally rid itself of the debt, legacy costs and other burdens that had been slowly crushing it for decades. Now, any problems it runs into can be blamed on the current management, rather than on short-sighted decisions made back when CEO Dan Akerson was a lieutenant on the U.S.S. DuPont and Mark Reuss was in junior high.

Today, the ominous clouds of bankruptcy have returned to the Motor City, but this time GM only has to watch (and it has a prime seat, inside the tallest building in town). Detroit, a city that has suffered nearly a half century of misfortune, mismanagement and mistreatment, has become the largest municipal bankruptcy case in history.


As with GM in 2009, this is a day that has been a long time coming -- one of the bleakest days ever for a city that has had plenty of them. Yet it should not even slightly surprise anyone who has ever lived in, worked in, visited or heard a late-night punch line about Detroit.

As with GM, the longer Detroit stayed out of bankruptcy, the longer it would have to wait for a more prosperous future on the other side.

"GM is proud to call Detroit home and today's bankruptcy declaration is a day that we and others hoped would not come," the automaker said in a statement after the city's Chapter 9 filing this afternoon. "We believe, however, that today also can mark a clean start for the city. We hope that all parties recognize the sacrifices to follow can help rebuild a stronger Detroit with a level of services and quality of life its citizens deserve. A healthy auto industry will play a part in Detroit's comeback story and GM is doing its part."

GM said it does "not anticipate any impact to our daily operations or business outlook."

Despite the concerns of Wagoner, the former CEO who was eventually forced out, GM's customers didn't abandon it during bankruptcy because GM was, for all intents and purposes, already bankrupt long before its high-priced lawyers filed the formal paperwork.

Detroit was running on fumes long before its emergency financial manager arrived in March. Its former mayor is in federal prison for corruption. Its former city council president recently got out of prison, and its most recent one hasn't been seen for weeks. Its overworked police officers are rewarded for working 12-hour shifts with smaller paychecks. Many streetlights don't work. Tens of thousands of homes and buildings are vacant, and vast swaths of entire blocks are now barren.

Basically, bankruptcy can only help Detroit. In that way, this is good news for GM, the many auto suppliers located here and just about everyone else with any connection to Detroit -- except, of course, those who earn their paychecks from city hall or hold any of its debt.

It comes amid many positive signs that understandably get overshadowed by the city's grim list of problems. Streets and sidewalks in the central business district are more crowded than they've been in a long time, and workers at a growing number of companies that recently uprooted themselves from bland suburban office parks can be seen during lunch hour relaxing at a newly created beach right in the middle of downtown. Just the other day, I discovered that the overgrown lot and abandoned warehouse where I and a group of reporters camped out during the UAW's contract talks with GM in 2007, is the site of brand-new senior apartments.

GM, after a scary but mercifully brief stint in bankruptcy, knows how surprisingly refreshing and reinvigorating the process can be. Hopefully, Detroit soon will, too.

It just has to suffer through a brief period of negative national publicity, uncertainty and endless jokes first -- you know, things it already has been enduring for generations. That's nothing new, but the opportunity for the city to finally get better would be.

You can reach Nick Bunkley at -- Follow Nick on Twitter


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