Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: Detroit | Gut Kick | Test | City

Detroit 'Gut Kick' Poses Latest Test for Long-Struggling City

Friday, 19 July 2013 10:24 AM

Michigan Avenue’s LJ’s Lounge has survived its share of setbacks over the years. The latest “is like a kick in the gut,” manager Sue Wallace said.

“There’s going to be a lot of people suffering” from Detroit’s race into bankruptcy court today, Wallace said in an interview. “I pray like hell we’re not one of ’em.”

Kevyn Orr, Detroit’s emergency fiscal manager, sought protection for the Motor City under Chapter 9 of the U.S. bankruptcy code to deal with more than $18 billion in debt and long-term obligations. In a statement, the bankruptcy lawyer said he had “no reasonable alternative” to seeking a legal shield from creditors through the court filing.

The move was inevitable, said Steven Rattner, a New York financier who headed President Barack Obama’s auto-industry task force in 2009 that put the predecessors of General Motors Co. and Chrysler Group LLC into bankruptcy reorganizations.

“It’s analogous to the auto companies, in that you have too many stakeholders whose claims are too underwater to have realistically ever worked this out without some kind of bankruptcy,” Rattner said in an interview. “I felt the same way about the auto companies as I did about Detroit from the first moment -- bankruptcy was the only option. Unfortunately, I think it was always inevitable.”

GM and Chrysler each emerged from Chapter 11 reorganizations in about six weeks and have since developed popular new models and returned to profitability. Detroit won’t be as easy to fix, Rattner said.

Much Messier

“This will be much messier than the auto companies,” he said. “This will go on for a long time.”

“You’re going to have much bigger haircuts for the workers and that’s going to mean much more pain than the workers for the auto companies were asked to bear,” Rattner said.

That’s what worries Wallace and other Detroiters.

“Unfortunately, some of the customers who come in here are going to suffer,” said Wallace, who was born and raised in Detroit. “We’ve been here since 1985 and we’ve seen a lot of ups and downs. We’re glad we made it this long and we hope we make it a little longer.”

Michel Soucisse, manager of Mudgie’s Deli on Porter Street, shares her concern.

“I really fear that Detroit will be cut apart by its creditors and some of our assets will start to be sold off willy-nilly,” he said in an interview. “I really hope it means that we get to keep our assets and get help at the same time.”

© Copyright 2022 Bloomberg News. All rights reserved.

Michigan Avenue's LJ's Lounge has survived its share of setbacks over the years. The latest "is like a kick in the gut," manager Sue Wallace said.
Detroit,Gut Kick,Test,City
Friday, 19 July 2013 10:24 AM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved