Finance

Auto Industry Gives $26 Million to Prop Up Detroit

by | June 9, 2014

By Matt Helms and Mark Stryker

Saying the fate of the Detroit Institute of Arts and easing pension cuts in Detroit's bankruptcy are critical to the city's future, representatives of Detroit's three automakers on Monday committed $26 million to the grand bargain on which much of the city's exit from bankruptcy is based.

The donations are about preserving the city's cultural heritage and helping pensioners facing steep cuts to retirement benefits, but "most importantly this money is intended to help the Motor City get back on its feet again," said Reid Bigland, an executive for Chrysler, which is donating $6 million to the DIA-pension deal. "This is really about being a contributor and working with those who are also committed to revitalizing this city."

General Motors and Ford and their charitable arms also are donating $10 million apiece, a major chunk of the $100 million the DIA has committed to raising for the federally mediated deal in which ownership of the museum will be transferred to an independent charitable trust for the equivalent of $816 million. All of the cash will flow into a fund to help reduce pension reductions for thousands of city workers. DIA board chairman Gene Gargaro said that auto companies' contributions have pushed the museum to 70 percent of its $100 million commitment.

There was poetry in the morning announcement being made in the DIA's famous Rivera Court, home of Mexican muralist Diego Rivera's "Detroit Industry" murals, a masterpiece whose depiction of noble Depression-era workers in Ford's River Rouge factory underscored the historic links between the auto industry, the city's cultural heritage and the working men and women who will benefit directly from the grand bargain. It was Edsel Ford who financed the creation of the murals in 1932, paying Rivera $25,000.

DIA leaders continue to solicit corporate, individual and foundation gifts to reach its $100 million threshold, but there's an even steeper financial mountain the museum still has to climb.

The DIA must raise another $200 million or more in endowment funds during the next eight years necessary to fund annual operations when its tricounty property tax millage expires in 2022.

The tax provides about $23 million in annual income, so the DIA needs a total endowment (investment fund) of about $400 million to cover the hole in the budget once the millage disappears.

"We're making strong and steady progress on the grand bargain," said DIA chief operating officer Annmarie Erickson. "We would like to get this wrapped up expeditiously. I think we'll be able to turn our attention to the endowment in the near future."

Chief U.S. District Court Judge Gerald Rosen, the federal mediator in the bankruptcy and the chief architect of the art-for-pensions grand bargain, praised as "heroes of the bankruptcy" all of the donors and retirees who are supporting the deal, as well as the political leaders who last week approved a $195 million contribution from state government.

"Today we are all Detroiters, we're all Michiganders and we're all DIA-ers," Rosen said.

Gov. Rick Snyder and Detroit's emergency manager, Kevyn Orr, said it's now up to retirees to approve the deal, and they strongly urged yes votes as the beneficiaries face a July 11 voting deadline. If retirees reject the deal, they face far larger cuts.

The city also must convince U.S. Bankruptcy Judge Steven Rhodes to confirm the city's bankruptcy exit plan, called a plan of adjustment, with the grand bargain as its centerpiece. That trial is expected to take as long as five weeks starting later this summer.

(c)2014 Detroit Free Press

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