Motor City on its last gasp

Detroit files largest municipal bankruptcy in US history

Detroit became the largest city in US history to file for bankruptcy protection on Thursday after decades of decline and mismanagement rendered the home of the nation's auto industry insolvent.

Once a bustling beacon of industrial might, the city is now a poster child for urban decay, its landscape littered with abandoned skyscrapers, factories and homes.

Vacant, blighted homes in once thriving neighborhoods are a common sight on the east side of Detroit, Michigan. Detroit filed the largest-ever municipal bankruptcy in US history on Thursday, marking a new low for a city that was the cradle of the US automotive industry and setting the stage for a costly court battle with creditors. [Photo/Agencies]

Crime is rampant, and the city literally cannot afford to keep the lights on a whopping 40 percent of streetlights are out.

Detroit's bankruptcy is expected to make it harder for municipalities in Michigan and other US states to borrow money by undermining confidence in what used to be among the most trusted bonds available.

Michigan Governor Rick Snyder said there was no other option.

"This is a difficult step, but the only viable option to address a problem that has been six decades in the making," Snyder said in a news release.

Detroit has seen its population shrink by more than half, from 1.8 million people in 1950 to 700,000 today.

With less revenue, Detroit had to cut back on services, prompting even more people to leave and eventually sending the city into an economic tailspin.

The Motor City meanwhile saw its main employers go through round after round of mass layoffs as auto factories were automated or outsourced and Asian competitors siphoned away market share.

"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder said in a letter accompanying the bankruptcy filing.

"The only feasible path to a stable and solid Detroit is to file for bankruptcy protection."

Earlier this year Snyder appointed an emergency manager with a background in bankruptcy to restructure the city's finances.

He said he had "very much hoped" the move would help Detroit avoid bankruptcy, but added that it is now time to "face the fact that the City cannot and is not paying its debts as they become due and is insolvent".