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Politics & Government
Thu March 14, 2013
Can Kevyn Orr pull off "one of the greatest turnarounds in the history of this country?"
It’s official: Detroit has an emergency manager.
His name is Kevyn Orr. And it’s fair to say that he charmed even some skeptical observers when he was introduced to Detroit Thursday.
Orr isn’t exactly a household name. He was—until he quit his job Friday—a partner at the Jones Day law firm in Washington, DC. He’s a bankruptcy lawyer and turnaround expert who helped Chrysler through a successful managed bankruptcy.
And though he attended the University of Michigan for both undergraduate and law schools, he has no particular ties to Detroit.
So one could be forgiven for wondering: why on earth would Orr take the job? His answer: “If we can do this, I will have participated in one of the greatest turnarounds in the history of this country."
Orr called tackling Detroit’s finances “the Olympics of restructuring.” The city is bleeding about $100 million a year, and has about $14 billion in debt.
It’s a grim place to start. But Orr appeared relaxed and confident at his media debut. He was flanked by Governor Snyder and Detroit mayor Dave Bing, who pledged to be “a good teammate” to the man who will assume many of his powers.
Snyder insists Orr will only be needed in Detroit for 18 months. He says the idea is to lay the groundwork for a financially stable future.
“It’s not simply walking out the door and saying, ‘Good luck again,’ Snyder said. "It really creates a number of structures to say, ‘Here’s a framework for elected officials to continue that path, and not fall back into some of the same challenges they faced before.'"
But while Orr courted the media inside state offices at Detroit’s Cadillac Place, protesters gathered outside.
All were upset that Detroiters are largely being stripped of their local representative government. But others had more specific concerns, too.
“I think it’s an injustice that’s being done out here. I think the Governor is trying to bust unions. This is all about union busting," said Tony Brown, a Chrysler union member.
As emergency manager, Orr will have the power to re-write union contracts if he thinks that’s necessary.
City retiree Deedee Harris is worried Orr will slash retiree benefits—one of the city’s biggest long-term liabilities.
“I think they’re trying to divide the retirees against the people that are working, and saying that we’re a legacy," Harris said. "But we made a deal with the city.”
Brown and Harris represent just two of the many groups Orr will have to contend with, as he takes on the inevitable task of breaking promises the city has made—to employees, retirees, and bondholders.
Even with an emergency manager’s sweeping powers, many people doubt that Detroit will be able to avoid bankruptcy.
Orr himself admits the threat of a bankruptcy is a tool he’ll probably have to use.
“The one thing everybody needs to know is, if you go into bankruptcy…chapter nine of the bankruptcy code is weighted toward municipalities," he said. "I don’t want to pull that cudgel out until I have to. I prefer to pursue a consensual resolution.”
Basically, it looks like the game plan is for Orr to pursue a bankruptcy-style reorganization without actually going into bankruptcy.
Eric Scorsone, a Michigan State University economist and municipal finance expert, agrees.
“I think the goal here would be to see what the EM can do and not do, and see what’s viable under that option…and see if bankruptcy does then become an option,” Scorsone said.
And either way, restructuring Detroit will be a monster challenge. “It’s very large scale. It's going to be incredibly complex,” Scorsone said.
But Orr’s biggest dilemma is really this: He’s got to cut costs while improving city services and quality of life. Everyone admits that’s the only real long-term solution to Detroit’s woes.
And if Orr does pull it off, he’s right—it will be one for the history books.