CHICAGO -Detroit's hometown automakers have pledged $26 million towards the Detroit Institute of Arts' $100 million contribution to the so-called "grand bargain" that's a key part of the city's plan to emerge from bankruptcy.
The museum announced the pledges from Chrysler Group LLC, Ford Motor Company, General Motors, and the General Motors Foundation at a news conference Monday attended by Gov. Rick Snyder, who called the contributions another step forward.
The $816 million "grand bargain" includes a $195 million contribution from the state government, $366 million from a group of private foundations and $100 million from the DIA. All the money will go toward the city's pensions in exchange for transferring the DIA's collection to a charitable trust.
The bargain to bolster city pensioners' while protecting the museum's fine art collection is the cornerstone of Detroit's plan of confirmation as well as settlements the city has won with most of its major labor creditors. Many of those settlements are based on the bargain, which also calls for all current and future lawsuits against the state to be dropped.
Ford will contribute $10 million, General Motors will give $5 million, General Motors Foundation will provide $5 million, and $6 million will come from Chrysler.
"We are extremely pleased and appreciative of this remarkable financial commitment by the leadership of our corporate community to support the Grand Bargain," said DIA board chairman Eugene A. Gargaro.
"Preserving the integrity of Detroit and one of its most beloved and historic pillars is of the utmost importance to GM and the GM Foundation," said Mark Reuss, General Motors Executive Vice President.
The grand bargain - proposed by bankruptcy mediators -- provides Detroit's pensioners with more than $800 million over a 20-year period, subject to present value discounts for more rapid donor payments.
Detroit's financial creditors are challenging the deal, saying it undervalues the art collection and unfairly favors pensioners over other creditors. Some want the museum to sell some of its assets to aid in creditor recovery rates.
Supporters of the grand bargain say that restricting the money to pensioners and excluding other creditors was the only way so much outside private money could be brought into the deal.
The Detroit City Council late last week unanimously approved a resolution as part of the overall grand bargain to transfer the art collection at the DIA to an independent trust that will protect it from the city's bankruptcy and any post-bankruptcy fiscal woes.
The Legislature approved bills earlier last week signing off on a $195 million cash payment from its rainy day fund. Snyder has encouraged retirees to vote in favor of the city's plan of confirmation. Creditors have until July 11 to vote.
The governor called the bills' passage a "major milestone in the reinvention of Detroit" and bringing about resolution of its bankruptcy, which is the largest Chapter 9 in the U.S. The legislation marks Michigan's most aggressive intervention since Detroit declared bankruptcy in July.
The nine-bill package also sets up an oversight board that will monitor the post-bankrupt city with the power to review all nearly all financial transactions and enacts a host of other provisions, including future labor contracts, retirement benefits, and duties of the chief financial officer.
The next milestone, Snyder said, is the trial on the confirmation plan, which is currently set to start on July 24, though creditors have sought a delay.
Snyder has cautioned that the museum's art is "not safe" until Bankruptcy Judge Steven Rhodes signs off on the plan of confirmation.
Moody's Investors Service in a special commentary said the grand bargain marks a "lost opportunity" for the city's bondholders and reflects ongoing tensions between bond and pension recoveries in the bankrupt city.
Moody's analyst Henrietta Chang in an interview Friday said: "It's not that this grand bargain, or these nine bills, are taking any money away from bondholders, but the state is providing money to one particular non-bondholder creditor class. The other provisions, including operational oversight and monetary oversight, do bode well for the longer-term credit quality of the city."
