By Christine Williamson, Crain News Service
DETROIT (June 12, 2014) — Three auto companies with their roots in Motown pledged $26 million on June 9 as part of a so-called “grand bargain,” an initiative that involves monetary pledges from outside parties that will keep pension cuts to a minimum as Detroit moves out of Chapter 9 bankruptcy protection.
The foundations of Ford Motor Co. in Dearborn, Mich., and General Motors Co., Detroit will contribute $10 million and $5 million, respectively, according to a news release from the Detroit Institute of Arts (DIA). The corporate side of GM will donate an additional $5 million while Chrysler Group L.L.C. will provide $6 million.
The auto company donations will be part of a $100 million commitment made by the DIA toward a community fund designated to reduce the pension debt of the $2.8 billion Detroit General Retirement System and the $3.4 billion Detroit Police & Fire Retirement System.
“This exemplary leadership, along with that of other donors yet to participate in this critically important initiative, will provide the additional momentum and excitement necessary for the DIA to satisfy its $100 million grand bargain pledge,” said Eugene A. Gargaro Jr., chairman of the DIA board, in the press release.
The DIA’s contribution — like that of the $195 million state contribution approved by the Michigan Legislature on June 3 — is a critical component of the proposal. The “grand bargain” is a court-mediated agreement to raise funds from outside sources to reduce pension cuts originally proposed in the city’s bankruptcy recovery plan. In addition to the auto makers’ foundations, 13 other non-profits pledged about $369.5 million.
The funding plan also ensures that artwork held by the city-owned DIA cannot be sold to pay creditors. The legislation also moves the art museum from city ownership into a non-profit entity over time.
The plan to bring Detroit out of bankruptcy by this fall is dependent on the approval of all creditors, including active and retired public employees.
This report appeared on pionline.com, the website of Pensions & Investments magazine, a Chicago-based sister publication of Tire Business.