Reuters reports Detroit’s top automakers have been tapped by the Detroit Institute of Art (DIA) to help raised money for Detroit pensioners, a move some argue is critical for Detroit to complete their bankruptcy plan and emerge from Chapter 9 bankruptcy.
The Detroit Institute of Arts (DIA), philanthropic foundations, and the state of Michigan hope to raise approximately $816 million under the so-called grand bargain. The DIA would raise approximately $100 million to ease pension cuts combined with money from other groups. If the money is raised it could also stave off a sale of the city’s artwork.
The state of Michigan must also raise another $350 million which the governor and legislatures are negotiating now. If the current proposal is approved the state would provide a $350 million contribution over 20 years or a $195 million lump sum payment now.
Automakers support the efforts of the DIA
According to Chrysler spokesman Kevin Frazier, “Chrysler Group is committed to playing a positive role in Detroit’s revitalization. Accordingly, we are reviewing the DIA’s request.” Ford also acknowledged they are also discussing the DIA proposal and have supported the museum for many years. General Motors echoed the sentiments of the other two automakers and said they are also “giving very careful consideration to how we can help preserve this treasure at such a critical time.” The DIA has not provided any additional information about the request and has declined to comment.
U.S. Bankruptcy Judge Steven Rhodes has announced he will begin reviewing Detroit’s plan to restructure $18 billion on July 24th. City workers and retirees will also start receiving information about the plan this week. Objections to the plan have also been announced by the U.S. government, bond holders, and nearby counties and bond insurance companies who are likely to receive much less than they are owed if the plan is approved and pensions are not cut.
Kevyn Orr makes pitch for state help
In other bankruptcy news, Kevyn Orr, Detroit’s emergency manager, told a special committee of Michigan lawmakers on Tuesday that the state’s money was essential to completing the Detroit bankruptcy adjustment plan, and if the state did not provide some help, the city will be “pushed back to the starting gate of the bankruptcy process.”
The plan is relying on an estimated $860 million to be raised from the state, the Detroit Institute of Art and other philanthropic groups. Orr told the committee the funds are critical because they could stave off larger pension cuts which would lead to a higher number of legal challenges which could derail Orr’s plans to finish the bankruptcy process by early September.
“We have an ambitious schedule. We have what we think is a reasonable plan. But to put it bluntly, we need your money,” Orr told the committee.
If the state agrees to provide assistance to Detroit it is also likely they will create a seven-member commission to oversee the city’s finances, a move that is similar to what the city of New York did to help recover from their financial crisis in the 1970s. Others who are supporting the state’s assistance argue that if the cuts are too severe some of the pensioners could require state assistance in the future.