By Vivienne Russell | 15 March 2013
A lawyer with a track record in turning round struggling businesses has been appointed emergency financial manager for the US city of Detroit.
Michigan state governor Rick Snyder announced yesterday that Kevyn Orr, who represented the Chrysler car company through its bankruptcy and restructuring in 2009, will take on the role from March 25.
Last month, a six-member independent financial review team sent to Detroit by Snyder concluded unanimously that a financial emergency existed in the city. Detroit is running a $300m deficit and has debts of $14bn. The review found there was no satisfactory plan to overcome the fiscal crisis.
Orr will work with city officials and citizens to create a financial plan to tackle the financial emergency.
Snyder said Detroit’s financial problems had been developing for 50 years and had now reached a ‘true crisis point’.
He added: ‘With this action and by working together, we can rebuild the sound financial footing needed in Detroit. The extensive experience that Kevyn Orr has in working to turn around financially troubled organisations will serve the citizens of Detroit well.
‘He will bring a fresh, objective look at Detroit’s finances that is needed to end this financial crisis, which has been more than a half-century in the making.’
Orr, a graduate of the University of Michigan, described the task ahead of him as the ‘Olympics of restructuring’ but said he felt ‘compelled’ to help the city back on to a sustainable financial footing and a sustainable rate of growth.
He said: ‘I am confident we can and will put the city back on the path to success.’
Detroit, once the heart of US motor industry, has experienced massive population decline and, as a consequence, has a much-reduced tax base. Unemployment in the city is at 18%, double the national average. There are huge shortfalls in the city’s pension funds and health care programme and 30% of the city’s tax revenues are spent on debt repayments.
Orr was nominated by Governor Snyder but his appointment was made by the Local Emergency Financial Assistance Loan Board. This board consists of the state treasurer, the director of the Department of Licensing and Regulatory Affairs and the state budget director.
He will have the authority to override the city mayor and council.
