Kevyn Orr, a University of Michigan Law School graduate and former partner at the law firm Jones Day, has been selected by Governor Rick Snyder as Detroit’s Emergency Financial Manager (EFM). As EFM, Orr will be responsible for overhauling Detroit’s finances and city services, including negotiating with creditors and unions to restructure the city’s obligations and reduce its budget deficits and long-term debt. While Orr has stated he hopes to avoid a Chapter 9 bankruptcy filing, he has described this assignment as the “Olympics of Restructuring.”
While at Jones Day, Orr was part of the team which led Chrysler through its bankruptcy and subsequent sale to Fiat. As part of that team, Orr faced similar challenges to those he is likely to face as Detroit’s EFM. Chrysler’s emergence from bankruptcy required negotiating significant concessions with bondholders and unions in order to reduce Chrysler’s overall debt. Now, as part of Fiat, Chrysler is experiencing dramatic sales growth and success. Detroit also has significant debt obligations to its bondholders and large legacy liabilities for union retirement and health benefits, which will likely require even more extensive negotiations to resolve.
A complex financial situation is not the only challenge which Orr faces as EFM. The appointment of an EFM in Detroit has been politically sensitive and is still the subject of protests within the city and the state. Orr has already faced the political issues involved in large restructurings during the Chrysler bankruptcy, where he was called to testifying before the House of Representatives regarding the decisions to close multiple dealerships. Everyone in Michigan is hopeful that Orr’s experience from the Chrysler bankruptcy will help the city of Detroit emerge from the Olympics of Restructuring with a gold medal.