Tags: Detroit | bankruptcy | GM | court

Forbes: Detroit Business Leaders Are in Favor of Bankruptcy

Tuesday, 23 Jul 2013 10:46 AM

By John Morgan

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Some of Detroit's top business leaders are staunch advocates of its bankruptcy filing, believing the only way for the dying city to be revived is for it to take stiff medicine.

Forbes reported business leaders there saw no reason for Detroit to put off the inevitable.

"While nobody welcomes the concept of bankruptcy, it is necessary to solve the long-term structural financial challenges of this historic city," said Sandy Baruah, president of the Detroit Regional Chamber of Commerce.

Editor's Note:
 
The Truth About the Economy — Government Documents Lead to Eerie Conclusion

"The private sector is thriving and businesses continue to invest in Detroit. Addressing Detroit's financial instability is the final barrier to robust growth."

Dan Gilbert, founder and chairman of Rock Ventures/Quicken Loans, a big investor in downtown Detroit, told Forbes he also agreed with the filing.

"Bankruptcy will be painful for many individuals and organizations but together we will get through it and come out stronger on the other side. We simply do not have a choice," Gilbert said. "Detroit's best days are ahead."

Baruah told those at a chamber board meeting that they need look no further than General Motors' recovery from is 2009 bankruptcy to know that the city can endure, Forbes reported.

"We've been buying cards from bankrupt automakers and flying on bankrupt airlines for years," he said.

However, General Motors received a huge federal government bailout to revive its fortunes, an avenue that it is unclear whether Detroit will be able to avail itself of.

A court battle over whether Detroit could legally file for municipal bankruptcy will be playing out this week, as the city sought a federal court hearing to put on hold challenges to its filing in a Michigan court, Reuters reported.

Detroit retirees, workers and pension funds are seeking help from Michigan's Ingram County Circuit Court to derail the bankruptcy, which they fear would threaten their pension plans.

A circuit judge said the state law that allowed Michigan Gov. Rick Snyder to approve the bankruptcy filing would violate constitutional protections for retirement benefits for public workers.

In an editorial entitled "Government Motors Is Alive and Detroit Is Dead," Investor's Business Daily argued Detroit's ills are the result of unions and government run amok.

"Detroit's response to a declining business climate was more taxes, fewer city services and bloated pensions for workers in the only growth area — government," Investor's Business Daily said.

IBD said unions created an environment where full-time U.S. Big Three autoworkers until recently had pay and benefits averaging $140,000 per year versus $80,000 for foreign competitors, plus it cost an estimated $2,000 per Big Three car produced to meet retiree health care and pension requirements.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

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