Detroit. Michigan’s Motor City, Goes Bankrupt

by Jörgen Eriksson on July 20, 2013

Opportunity made in DetroitThe city of Detroit, that we have written about before on this blog, has now gone bankrupt. The city filed the largest municipal bankruptcy in U.S. history on Thursday July 18th, and it is most likely also the largest municipal bankruptcy in history, globally.

The bankruptcy was forced by the Governor of Michigan, as a necessary step to halt a decades-long decline and resolve the city’s spiralling debt crisis.

The city is in a terrible state where half or more working aged residents have no jobs. Those with jobs have low-pay, part-time or temp ones. As economic conditions have gotten worse, crime has exploded.

Every single night in Detroit there are frightening confrontations between criminals and exasperated homeowners. Many buildings in the inner city are abandoned and are falling apart. Detroit has become an equivalent in reality of the fictional Gotham city.

The ruins of Detroit

For over a century, Detroit was America’s industrial heartland. It attracted workers from around the country for high-paying jobs with good benefits. Now they are gone. In the last decade, half the population left. Factories and neighborhoods are empty. Detroit is America’s poorest big city. Poverty, unemployment, hunger and homelessness are endemic. Former middle class residents suffer like others. Their status reflects a national nightmare.

However a bankruptcy may be just what the city needs to turn around its development.

To turn the negative trends and regain confidence is a matter of convincing talented people, businesses and investors that it makes sense for them to bet on Detroit. To remain or return or move there and to invest there. The opportunity to be in Detroit must become more attractive to sufficient number of people, than other places that compete for their attention.

1955 ChryslerWhen General Motors filed for bankruptcy in 2009 many thought it was the end of what was once the world’s largest carmaker. The company had run out of cash. Its share price had shrunk to $3 and its pension costs were crippling.

But the declaration of bankruptcy helped General Motors turn things around, and quickly it became stronger and leaner. Its share price rose. And last year it made $6 billion in profits.

Now Detroit is hoping for a similar turnaround. Residents might see improvements soon, as the bankruptcy filing offers breathing room and in the short run allows Detroit to use its limited resources to put more police cars and ambulances into service, and maybe to reopen schools that have been closed.

_ny_omslag_hela_MB.inddWhat matters then, of course, is to return the city to sane, well planned and well executed place management. It is about regaining confidence from investors, businesses and talented people that the city may now offer opportunities and a dynamic growth environment for the future, where rock-bottom real estate prices and access to unemployed labour might be attractive for the creation of new opportunities.

As many of our readers know, we published a book on place management in 2011. The book highlights the responsibility of place managers and presents a number of realistic recommendations for practising place management in an active and forceful way.

From the wealth of examples in the book, the reader can draw lessons from successful and unsuccessful cases. The book does not sidestep controversial questions and criticises the use of slogans and simple advertising messages. It positions place management in a economic, historical and social context. We do recommend the new managers of Detroit to read this book.

We have written before on this blog about failed and bankrupt cities, and most often, the problems come from a lack of planning and coordination, in essence failure in place management.

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