The fate of Detroit

Updated: Saturday, August 3, 2013
The fate of Detroit story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - On Wednesday, one week after it declared itself bankruptcy, the City of Detroit celebrated its 312th birthday.

Tonight, in Tom's Corner, Tom Van Howe says Detroit's troubles, decades in the making, are only just beginning.

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I'd like to be a rah-rah guy for our state's largest city. But the truth is, no matter how I twist it and turn it and shape it...I Just can't.

The City of Detroit is the result of a train-wreck 50 years in the making. We all watched it happen, one slow-motion, hair-raising leg at a time.

How many times have you seen someone shake his head and say, helplessly, "well...that's Detroit."

And there are so many things to blame it on. Blame it on incompetent or corrupt leadership. Blame it on an auto industry that seemed unable to compete with the rest of the world. Blame it on unfunded pensions.

Blame it on NAFTA that did take hundreds of thousands of jobs south. Blame it on OSHA, which required companies to spend millions to make workplaces safer. Blame it on the cost of oil from the Persian Gulf. Blame it on white flight.

Blame it on loss of tax revenue.

Blame it on what or whomever you please.

The fact is, Detroit is a gigantic mess. It is a failed city.

In 1960 it was the fifth largest, and richest, per capita, city in the country with a population of nearly two million.

Now, with a population of just 700-thousand, 60 percent of its children live in poverty. Unemployment plods along at nearly 20 percent.

Some 30-thousand current and retired city workers are wondering if they'll have any of the pension they helped pay for.

A full third of Detroit's 140-square miles—an area the size of Grand Rapids—is now vacant or desolate.

It's a city that finds it difficult to even maintain street lights.

In the city itself, there is anger and outrage at the predicament people are finding themselves in...as if they believed the city could go on borrowing and running up bills that it never intended to pay. That day is now over.

I thought the defiant column by Mitch Albom, the celebrated Free Press writer, was terrific.

"Yeah, we're broke," he wrote, "But we got up this morning and had breakfast. Yeah we're broke. But we'll carry on...We'll still be here. We're not going anywhere."

It's nice and its easy to be defiant. But its not going to pay any bills. Its not going to bring back people who've already left. It's not going to raise tax revenues. Its not going to make leaders anymore honest.

For the record...Stockton, California, declared bankruptcy 13 months ago. And its parks are reportedly populated with drug dealers, its courts with lawsuits, its business districts with boarded up windows—with little relief in sight.

Are there positive signs in Detroit? Yes.

The Tigers are in first place. Consumer Reports says the new Chevy Malibu is hands down the best car on the road in just about any price range. Private developers want to build a new soccer stadium downtown. The state has agreed to issue $450 million in bonds to help develop a new Red Wings hockey stadium—and $200 million more to help develop 45 blocks near downtown.

So yeah...some things have the patina of progress.

But bright spots aren't enough.  Detroit is in for a long painful recovery. If, in fact, its up for it. There will be no bailouts.

We know that now.

So, in a very real way, Detroit is a new frontier—an urban frontier—waiting for courageous and creative private investment to mold something new from the rubble.

We have our fingers crossed. In the meantime...Happy birthday.

In this corner...I'm Tom Van Howe.

Business News

Last Update on January 23, 2015 18:19 GMT

HOME SALES

WASHINGTON (AP) -- More Americans purchased homes in December, yet total sales slipped in 2014 as first-time buyers struggled to find houses.

The National Association of Realtors says sales of existing homes rose 2.4 percent last month to a seasonally adjusted annual rate of 5.04 million. But over the course of the entire year, sales fell 3.1 percent to 4.93 million.

Only 29 percent of sales went to first-time buyers last month, compared to a historic average of 40 percent. Prospective buyers were priced out of the market due to rising home values and relatively stagnant incomes. Still, affordability has improved in recent months as mortgage rates have plunged, leading to the possibility of stronger sales in 2015.

Median home prices increased 6 percent over the past 12 months to $209,500.

LEADING INDICATORS

WASHINGTON (AP) -- An index designed to predict the future health of the U.S. economy posted a fourth straight solid gain in December.

The Conference Board says its index of leading indicators increased 0.5 percent in December after a revised gain of 0.4 percent in November. The index also posted solid gains in September and October after a flat reading in August.

The December increase reflected strength in a number of components of the index. Conference Board economists said this suggested the economy was gaining momentum at the end of last year.

ATLANTIC CITY-WALL STREET

ATLANTIC CITY, N.J. (AP) -- Wall Street is giving a big thumbs-down to New Jersey's effort to tame Atlantic City's finances.

Moody's Investors Service on Friday lowered Atlantic City's bond rating by six steps, from Ba1 to Caa1, which is deep into junk territory.

The move came a day after Gov. Chris Christie appointed corporate turnaround specialist Kevin Lavin as the city's emergency manager and Kevyn Orr, who helped Detroit through its bankruptcy filing, as his assistant.

Christie's executive order appointing the pair indicates a bankruptcy filing is possible to help reduce the city's debt, which Moody's calculated at $397 million.

The agency cited an increased risk of default, and "a rapid, dramatic change" in New Jersey's longstanding policy of preventing a default or bankruptcy of any of its local governments.

EARNS-GENERAL ELECTRIC

FAIRFIELD, Conn. (AP) -- General Electric Co. on Friday reported fourth-quarter net income of $5.15 billion.

The Fairfield, Connecticut-based company said it had profit of 51 cents per share. Earnings, adjusted for non-recurring costs and to account for discontinued operations, were 56 cents per share.

The results surpassed Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 55 cents per share.

The industrial conglomerate posted revenue of $42 billion in the period, falling short of Street forecasts. Analysts expected $42.4 billion, according to Zacks.

GE shares have fallen nearly 4 percent since the beginning of the year, while the Standard & Poor's 500 index has stayed nearly flat. The stock has decreased almost 7 percent in the last 12 months.

UPS-OUTLOOK

NEW YORK (AP) -- The huge cost of ensuring timely deliveries cost UPS during the holidays and the shipping company is now cutting its outlook for the year.

The Atlanta company hired more workers and boosted capacity at its facilities during the busy holiday season to avoid a repeat of 2013, when shippers struggled with a deluge of orders.

UPS Inc. now expects 2014 earnings of $4.75 per share, down from its previous forecast of between $4.90 and $5 per share. Industry analysts had been looking for earnings of $4.96 per share, according to FactSet. For the fourth quarter, UPS expects earnings of $1.25 per share, well below the $1.47 per share analysts had projected.

FORD-OUTLOOK

DETROIT (AP) -- Ford says it will take an $800 million charge in the fourth quarter because of exchange rate problems between the Venezuelan bolivar and the U.S. dollar.

The company says the charge will cut fourth-quarter net income by $700 million, after deferred tax benefits. But the automaker still expects a full-year pretax profit of $6 billion when it reports 2014 earnings Thursday.

In October, Ford cut its full-year pretax profit forecast to $6 billion. That's down from $8.6 billion in 2013.

Ford says in a regulatory filing that the company can no longer exchange bolivars to dollars due to Venezuelan currency exchange controls. The company says the controls have limited auto parts availability and have cut into normal production. But Ford says it will continue operations there for the foreseeable future.

GOODYEAR-RECALL

DETROIT (AP) -- Goodyear is recalling about 48,500 SUV tires after finding small cracks in the tread during endurance testing.

The move has forced General Motors Co. to stop selling about 6,300 Chevrolet Traverse, GMC Acadia and Buick Enclave models until the tires are replaced.

The recall covers 18-inch Fortera HL tires made from Nov. 30 through Jan. 10. Goodyear Tire & Rubber Co. says the problem hasn't caused any crashes.

About 32,100 of the tires were made for the GM SUVs, which are produced at a factory near Lansing, Michigan. Another 16,400 were sold as replacement tires.

GM says the 18-inch tires are on about 30 percent of vehicles made at the plant, and the problem has not affected production.

Owners can have the tires replaced for free at any Goodyear store or authorized dealer.

DEERE-LAYOFFS

Deere to lay off more than 1,000 workers in Iowa, Illinois

Deere is laying off about 910 workers indefinitely from factories mostly in Iowa and will sideline another 500 employees in Illinois until late summer, as the agricultural equipment maker adjusts to demand for its products.

The Moline, Illinois, company also says it is adding 220 jobs at construction and forestry factories in Iowa. It plans to fill nearly all those positions with workers were laid off at agricultural equipment factories last year.

The latest indefinite layoffs will be at sites that build agricultural equipment.

Employees laid off until summer work at the company's seeding and cylinder factory in Moline. That location is going on an extended inventory adjustment shutdown.

Deere & Co. is the world's biggest farm equipment supplier. It employs about 29,000 in the United States and Canada.

US-UNION MEMBERSHIP

WASHINGTON (AP) -- Union membership in the U.S. is down slightly, making up just over 11 percent of the workforce last year.

That's a drop of 0.2 percentage points from the year before.

The Labor Department says public-sector workers have the highest union membership rate at nearly 36 percent. That's more than five times higher than membership of private-sector workers at less than 7 percent.

Workers in education, training and library jobs and in protective service jobs have the highest unionization rate, at 35 percent.

Earnings were higher for union members last year, at $970 a week versus $763 a week for non-union members.

AFL-CIO President Richard Trumka says the report suggests that with 58 months of consecutive job growth, "workers made great strides and confronted great challenges."

EXPEDIA-TRAVELOCITY

NEW YORK (AP) -- Expedia has acquired travel booking site Travelocity from the Sabre Corp. for $280 million in cash.

The deal adds to Expedia's growing portfolio of websites. The Bellevue, Washington-company already owns nearly a dozen travel sites including Hotels.com, Hotwire and Egencia, the world's fifth-largest corporate travel management company.

Since 2013, Expedia Inc. has been powering Travelocity's U.S. and Canadian websites and providing Travelocity access to Expedia hotel supply and customer service program. So for users, this acquisition will have little noticeable change.

The move allows Sabre to focus more on its back-end system for selling airline tickets, hotel rooms and car rentals. Sabre is one of three global distribution system companies -- along with Travelport and Amadeus -- that handle sales for travel agencies and online booking sites like Expedia.

GOPRO-NHL

NEW YORK (AP) -- GoPro has signed a deal with the NHL to bring its wearable cameras closer to the action on the ice and let viewers see games from the perspective of players and referees.

It's the company's first such deal with a major professional sports league. While GoPro would not comment on whether other partnerships are in the works, they would make sense.

As part of the NHL deal, footage from GoPro cameras on players, referees and placed around the rink will be shown as part of the live broadcast of this weekend's All-Star events.

Later, prerecorded footage from the players will be incorporated into TV broadcasts of hockey games.

DAVOS FORUM-CLIMATE-POVERTY

DAVOS, Switzerland (AP) -- French President Francois Hollande is calling for investments in green technology as a way to fight both global warming and poverty.

Hollande, who will host the next crucial round of climate talks, called for "huge investment in the green economy" as he and other world leaders kicked off a year of campaigning to clinch twin deals addressing climate change and poverty.

The interconnected themes took center stage Friday at the World Economic Forum in Davos with urgent calls for nations to support two long-sought deals.

One, slated for talks in September in New York, would establish sustainable development and poverty-cutting goals through 2030.

The other, to be negotiated in December in Paris, would set a legally binding climate pact whose focus is on more near-term emissions cuts from 2020.

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