Chrysler's 'America's Import' ad stars music legend Bob Dylan. (Chrysler)
With apologies to Seattle Seahawks fans, some of the biggest stars of Sunday’s Super Bowl XLVIII broadcast featured ads for cars and trucks minted by Detroit and what they represent:
Namely, a lesson in American resilience. Nowhere should that have more resonance than here, the traditional hometown of General Motors Co., Ford Motor Co. and the Chrysler unit of Fiat Chrysler Automobiles NV, where the city now is gutting through the largest municipal bankruptcy in the nation’s history.
Their collective rebound, evinced by rising sales, strong financial results and markedly improved vehicles, show that revival of Detroit institutions can be real and sustainable. That the restructuring can produce new beginnings. That the contentiousness of bankruptcy and job cuts and plant closings and asset sales and leadership changes can midwife regeneration that changes the debate about what comes next.
The Super Bowl ads are “an interesting reflection of where the auto industry and Detroit have been over the past four years,” FCA CEO Sergio Marchionne told Paul W. Smith Monday on NewsTalk 760-WJR. The Chrysler ad starring legend Bob Dylan, the latest in a string of Chrysler work touting a real Detroit story to a national audience, “was a celebration of the fact that the reconstruction is complete.
“It’s a recognition of the work that has been done by the men and women at all the car companies who work out of Detroit, not just us. We have gone miles. We have reacquired a phenomenal amount of credibility on the world stage. We’ve got to turn the page now.”
Same for the city of Detroit, mired in the uncertainty and confrontation that Chapter 9 bankruptcy augurs for creditors and unions, pensioners and employees, business leaders and politicians — all of whom have a vested interest in the outcome of a historic workout none can predict or adequately control.
Yes, I know the convenient dodge from those who would prefer to avoid the obvious parallels between running an automaker into the ground and running a municipal government into the ground: government is not a business.
Wrong. Both succeed and fail on the strength (or weakness) of managing reality, dollars and cents, not some mythical ideal that exists only in gauzy memory or an eighth-grade civics class. Neither business nor government can allow expenses to consistently outstrip revenue for too long, cannot charge customers or taxpayers more and deliver less, without inviting serious existential consequences.
Detroit — the auto industry and the city — proves the rule with stark clarity. The workouts exacting harsh discipline on entrenched interests are the logical result of cultures too willing to ignore basic laws of economics that cannot be denied forever, even here.
Detroit’s pensioners, employees and their unions are reliving the nightmare visited on Detroit’s automakers in the dark days following the global financial meltdown, complete with bankruptcy (in the case of GM and Chrysler) and restructurings executed by all three. If recent developments are any indication, the municipal workout may not be as brutal as originally feared.
A coalition of 10 private foundations, the state and the Detroit Institute of Arts is pledging to raise $820 million to supplement underfunded pensions in exchange for spinning the museum and its city-owned collection into a perpetual charitable trust managed by the nonprofit DIA.
In a draft “Plan of Adjustment” circulated last week to creditors, Emergency Manager Kevyn Orr proposes to regionalize the city’s Water and Sewerage Department and collect $47 million annually in lease payments from surrounding counties over 40 years to reduce outstanding liabilities.
On both counts — the proposed DIA-pension and water department settlement — the language used to describe the potential deals reinforces the imperative for the city to either own (water department) or claim (DIA) prized assets, to ensure better management and to use their value to generate cash to more fully honor pension obligations as a way to settle the case.
The bankers? They’re getting squeezed. The city is suing Bank of America and UBS Securities over a controversial pension “certificates of participation” transaction that Detroit’s complaint says violated state law when it was executed. And U.S. Bankruptcy Judge Steven Rhodes seems to agree.
A win or a more advantageous settlement could bolster obligations to unions and pension funds, even as it sends a message to a financial community often too ready to feed dysfunctional political leadership fresh borrowing it cannot afford. Just because a deal can be done to generate fees doesn’t make it the right deal to do, no matter how desperately local pols need the dough.
Detroit’s Great Unwinding is taking shape, harbinger of a reconstruction effort hometown automakers are completing and living to talk about. Their lessons should not be ignored.