Automakers to Help Save Detroit’s Art Treasures
General Motors, Ford and Chrysler are driving into Detroit's bankruptcy reorganization by pledging $26 million to help support retiree pensions while keeping the city's art treasures off the auction block, officials announced.
The money will go toward city pensions and will be part of the Detroit Institute of Arts' $100 million commitment to what's being called the "grand bargain" to resolve the largest public bankruptcy in U.S. history. It's helping keep city-owned pieces in the museum off the auction block as some creditors demand they be sold to pay off some of Detroit's billions in debt.
Of the $26 million, $10 million will come from Ford Motor Co., $6 million from Chrysler Group LLC, $5 million from General Motors Co. and $5 million from the General Motors Foundation.
"The city needs more and specifically the city needs cash," Reid Bigland, head of U.S. sales for Chrysler, said during the announcement at the museum.
Since leaving bankruptcy protection itself in 2009, GM has posted about $20 billion in earnings and currently has a cash stockpile of $27 billion. Chrysler has earned nearly $4 billion since exiting bankruptcy and had $12.5 billion in cash at the end of the first quarter.
Last week, the Michigan Legislature approved sending $195 million to Detroit's two retirement systems, and Gov. Rick Snyder has said he will sign the bill. A dozen foundations also have committed about $360 million.
The influx of money for pensions has become part of state-appointed emergency manager Kevyn Orr's plan of adjustment, which is Detroit's roadmap through and beyond bankruptcy.
As part of the deal, the museum and its assets would be transferred to a private nonprofit. About 2,800 city-owned artworks have been valued at between $454 million and $867 million.
Museum officials would not say how much more it needs to reach its $100 million goal. "We continue to fundraise," spokeswoman Pam Marcil said.
Snyder called the corporate and foundation support the "fundamental core" of Detroit's comeback.
"It's a fragile comeback," he said. "Our work is not done. We need to follow through."
Orr has said the city's debt is $18 billion or more with $5.7 billion in unfunded retiree health care and $3.5 billion in unfunded pension liabilities.
The city already has reached a deal â?? brokered by mediators â?? that would protect the art forever and limit pension cuts for approximately 30,000 retirees and city workers to no more than 4.5 percent instead of as much as 26 percent. If the retirees and employees do not support it, the money from the state, foundations and DIA pledge would be made moot and deeper pension cuts could become inevitable.
While retirees are not thrilled with what they are being asked to give up, their leaders are seeking 'yes' votes to the plan of adjustment.
"You cannot eat principle and uncertainty does not pay the bills," Detroit Retired City Employees Association president Shirley Lightsey said during Monday's announcement.
Retirees have until July 11 to vote on the plan. The trial on the city's case was scheduled to start July 24, but bankruptcy Judge Steven Rhodes on Monday pushed it back to Aug. 14 to allow all sides more time to prepare their cases.
The city also has until July 21 to file a summary of creditor voting on the plan.
"We've got to get the vote in," Orr said. "I need every vote of every retiree and every active employee, safety and non-safety, to vote 'yes.' Without that vote we're leaving ourselves vulnerable to parties who aren't as sympathetic with the efforts that were made."
Bond insurer Syncora Guarantee and some other creditors want the city to sell off what it owns in the art museum.