How do you save the reputation of a city that has been in a downward spiral since the 1950s? What if that city is Detroit, and what if the latest degradation was declaring bankruptcy?
The Motor City’s bankruptcy filing last week put the city’s debt at $18.5 billion, and eating up much of it are the retiree pensions and health benefits of city workers.
In terms of reputation management, the bankruptcy filing and long list of creditors are only part of the problem. Detroit’s reputation is tarnished by corruption, an exodus by residents, a high crime rate, thousands of abandoned buildings, and crumbling infrastructure.
Detroit’s culture—whatever is left of it—is on the verge of being lost, too. The Detroit Historical Society and its collections of cars might go to creditors, but that’s a small price to pay if the city can start on the road to recovery.
In a press conference announcing the bankruptcy, Michigan Gov. Rick Snyder said: “Now is the opportunity to stop 60 years of decline. … How many times have you said to stop kicking the can down the road and do something? We are doing something.”
Right now, the key question is whether the bankruptcy will be over before it starts. A judge has ruled the filing unconstitutional, because it threatens retiree pensions. The city is petitioning a federal judge to say otherwise.
If we look at some of the other large bankruptcies in U. S. history, we see mixed results. The companies recovered, got liquidated, or were seized or bailed out by the government. Please note that of the top 10 list, two are automakers.
1. Lehman Brothers Holdings, September 2008: $691 billion in assets. Outcome: Liquidated.
2. Washington Mutual, September 2008: $327.9 billion. Outcome: Seized.
3. WorldCom, July 2002: $103.9 billion. Outcome: Purchased.
4. General Motors, June 2009: $91 billion. Outcome: Bailed out.
5. CIT Group, November 2009: $80.4 billion. Outcome: Bailed out.
6. Enron, 2001: $65.5 billion. Outcome: Liquidated.
7. Conseco, 2002: $61.4 billion. Outcome: Emerged two years later.
8. MF Global: $41 billion (as of Sept. 30). Outcome: Pending.
9. Chrysler April, 2009: $39.3 billion. Outcome: Two years after, company was profitable.
10. Thornburg Mortgage May, 2009: $36.5 billion. Outcome: Company was liquidated.
For Detroit, without any real recovery plans other than to try to erase its debt, its prospects are dim. They only way the city can reverse the trend, assuming a judge approves its bankruptcy, is to attract business to the city. Maybe it should take a page from Chrysler, which rebranded itself and created a new image to attract a new generation of car buyers.
Just like every other successful branding and reputation management campaign, Detroit has to back up a revitalization, starting with cleaning up the streets, attracting new enterprises and retaining existing businesses.
Bankruptcy could be the first step.
Gil Rudawsky heads the crisis communication and issues management practice at GroundFloor Media in Denver. He is a former reporter and editor. Read his blog or contact him at firstname.lastname@example.org.