Detroit’s Emergence from Bankruptcy Offers Insights to Address 21st Century Leadership Challenges

Filip Vojvodic-Medic
Megan Doherty
2 min read
On July 18, 2013, the city of Detroit filed for Chapter 9 Bankruptcy, the largest municipal filing in U.S. history.

On July 18, 2013, the city of Detroit filed for Chapter 9 Bankruptcy, the largest municipal filing in U.S. history. Sixteen months later, a public-civic coalition came together to form “the grand bargain,” pledging millions of dollars to move Detroit out of the red. On December 12, 2014, Detroit officially moved out of bankruptcy.  A new city is now being shaped—offering transatlantic partners a key opportunity to view global engagement in action.

Visionary leadership proved crucial in lifting Detroit from bankruptcy—and provided strategies leaders across sectors and countries can apply to their own work.

Indeed, the unprecedented “grand bargain” between the state and local governments, citizens, and philanthropic foundations formed a key step towards Detroit’s renewed global engagement, as a recent report by the Transatlantic Leadership Initiatives team, Transformational Leadership: Models for Policy Innovation from the Continents of the Atlantic Basin, explored. In this deal, foundations, the state, and the Detroit Institute of Art (DIA) pledged a total of $816 million dollars to bolster the state pension system and give the DIA’s art collection new, bankruptcy-proof ownership. Particularly striking was the buy-in of the foundation sector. The concept of saving a bankrupt city was foreign to most foundation boards, yet in a series of closed-door meetings and dinners over several months, foundation leaders agreed to join the state government in a coalition to save the city. Retired general municipal workers met the philanthropic groups halfway and accepted 4.5 percent cuts to their monthly checks, an end to cost-of-living increases, higher health care costs, and a mandatory forfeiture of previous payments that were deemed improper. Retired firefighters and police officers accepted smaller reductions. Judge Rhodes of the U.S. Bankruptcy Court of Eastern Michigan, who delivered the verdict on the initial bankruptcy ruling, said that Detroit’s grand bargain bordered on “miraculous.”

Detroit’s “miraculous” story provides important strategic and tactical insights for all transatlantic leaders navigating rapid change and moving towards greater global engagement.  The relationship building skills, cross-sector collaboration, and innovative and visionary leadership that produced the grand bargain provide models to leaders across the GMF alumni network.  

With this in mind, GMF invites its transatlantic alumni community to gather in Detroit from September 21-23 for its next Marshall Seminar on “Leading Through Transition Toward Global Engagement.  This two day Seminar to explore strategic questions of how to lead change with coalitions, creative breakthroughs, and equitable outcomes while leveraging global networks and trends.