WHEN DIMON CALLED GILBERT: HOW A PHONE CALL LED TO $100M FOR DETROIT

Original Story: Freep.com



When the head of the world’s largest bank called the local billionaire bent on Detroit’s revival, good things happened.

JP Morgan Chase CEO Jamie Dimon plans to be in Detroit today to announce a $100-million investment in the city that began several months ago with a phone call to billionaire Dan Gilbert, the Quicken Loans founder who owns or controls more than 40 downtown buildings.

“Obviously, Detroit was having issues,” Dimon told the Free Press this week in an exclusive interview. “I got together some of our senior people and said, ‘What can we do that’s really neat, that could be really creative?’ ”

Two of the most powerful men in American business and finance developed a relationship in recent years as their interests intertwined. So when Detroit slid into Chapter 9 bankruptcy last year, Dimon wanted to act and sought Gilbert’s advice.

“We pointed him and his people to various relationships or others that we knew about here in Detroit,” Gilbert told the Free Press this week. “They called back and said, ‘Here’s what we’re doing, and we’re pretty excited about it.’ ”

? PDF: JPMorgan Chase breaks down details of $100M Detroit investment

? Related: 5 ways JPMorgan Chase will spend $100 million to improve Detroit

Over the coming five years, the $100 million will speed up the city’s blight-removal efforts, strengthen workforce development, pump money into urban redevelopment projects, train entrepreneurs and provide rehab loans to homeowners. The money will flow to groups already active in the city, including the M-1 Rail streetcar project, Eastern Market, Focus: HOPE and a variety of workforce training and entrepreneurship programs.

“No one’s forcing them to do this by any means,” Gilbert said. “I think they’re doing it because they think Detroit’s not only in need of help in a lot of areas, but they believe in the long-term growth and they want to be involved in the ground level. So I think it’s very, very important and very exciting.”

The bank is hoping to make money off the deal from loan interest, but mainly by helping revitalize one of its major markets, where it has 1 million regional customers, 2,500 employees and a lot of history as the successor company to the old National Bank of Detroit. The positive public relations of helping Detroit, with its auto industry nearly felled by the Great Recession, is also a benefit for the major financial player.

“When you’re in a town, you try to be a great citizen there,” Dimon said, “and we happen to be a big player in Detroit.”
Commitment hailed

That first phone call led to secret discussions involving Gov. Rick Snyder, Mayor Mike Duggan, and many others. Today, Dimon will attend a celebratory lunch with Duggan and Snyder to announce Chase’s commitment.

Snyder hailed the commitment this week, calling it “very exciting.”

“I think it really helps and it sends a great message that people see significant value in investing in Detroit and that there’s a lot of upsides,” he said. “As a result of the bankruptcy, Detroit hopefully will be viewed as one of the great value places to invest, a place that has a future in terms of living and working there.”

? Related: Grand Bargain bankruptcy legislation could see vote today

Snyder added that Chase’s commitment this week might help nudge Lansing lawmakers to vote on the rescue plan for Detroit. That plan would see the state commit the equivalent of $350 million over 20 years toward a grand bargain to shore up Detroit pensions and protect artwork at the Detroit Institute for Arts from sale. It is currently being debated in the Legislature.

“I view it as a very positive statement to make,” Snyder said of the Chase pledge, “that private organizations are seeing value in Detroit and really want also to help this equation. So hopefully that will be further encouragement for legislators to vote to support the package.”
Key to revitalization

Dave Blaszkiewicz, president of the civic group Downtown Detroit Partnership and head of the Invest Detroit fund for local development projects, said the Chase investments will be key in advancing Detroit’s revitalization efforts.

“You couldn’t ask for a better time to bring these dollars in,” he said.

For Chase itself, the benefit comes from fostering the economic climate in one of their key markets, said Peter Scher, Chase’s executive vice president of corporate responsibility.

“We feel like we have been and will be a part of the community of Detroit for the long term,” he said. “The thing that drives this for us is both a sense of responsibility and also a sense that we want to be in Detroit for the long term and so we have an interest in seeing Detroit succeed.”

“We essentially spent the last six months trying to determine where there are areas where we would be uniquely positioned to make a difference, to help accelerate some of the efforts that are already going on,” Scher said. “What’s in it for Chase is the long-term success of Detroit. If it’s good for the economy, it’s good for our business.

Chase also is concerned with finding solutions for all the other cities around the world where it does business in some 60 nations.

“So to the extent that we can begin to find solutions in a place like Detroit, our hope is that those solutions will be applicable in other places around the country and frankly around the world.”

Chrysler Hires Law Firm Jones Day as Bankruptcy Counsel

Chrysler LLC has hired the prominent law firm Jones Day as bankruptcy counsel, according to several people familiar with the matter. The firm was hired several weeks ago to help the ailing auto maker prepare for a possible Chapter 11 bankruptcy filing.

A Jones Day spokesperson declined to comment. A Chrysler spokeswoman couldn't be reached.

Chrysler's move suggests the auto maker is preparing for imminent financial failure should its efforts to persuade Congress to deliver federal rescue funds fall short. Chrysler, which is majority-owned by private-equity firm Cerberus Capital Management LP, says it needs a $7 billion capital infusion before year end.

Detroit's three auto makers have lobbied Congress for some $34 billion in immediate financing amid the deepest recession since the Great Depression. General Motors Corp. says it needs $4 billion by the end of the month. Ford Motor Co., which has a slightly better cash position after mortgaging nearly all its assets in 2006, is seeking a $9 billion line of credit it hopes it won't have to tap.

Jones Day co-head of restructuring Corinne Ball is handling the case, said the people familiar with the matter. She has worked on other automotive bankruptcies, such as that of auto-parts supplier Dana Corp., and many cases involving the United Auto Workers union. She represented GM in its acquisition of Korean auto maker Daewoo.

Reached by phone Friday afternoon, Ms. Ball declined to comment.

Chrysler has been seeking mergers or other alliances in an attempt to rationalize its cost structure. The company engaged in preliminary merger discussions with General Motors, but the talks were put on hold as the recession worsened and GM's cash position became dire. In testimony before a Senate panel Thursday, Chrysler Chief Executive Robert Nardelli said he would accept a forced merger with GM as a condition for a federal bailout.

Lawmakers skeptical of providing rescue funds have asked Mr. Nardelli why Cerberus won't inject more of its own cash into the auto maker.

Mark Zandi, chief economist at Moody's Economy.com, told senators Thursday the total payout could rise to $125 billion to keep Detroit's car companies out of bankruptcy for two years.

The auto makers have encountered skepticism on Capitol Hill after a big infusion from a recently passed financial-rescue package into banks and other financial firms has failed to unfreeze credit markets and has angered lawmakers' constituents. Auto makers have been forced to submit detailed restructuring plans and cut executive pay in an attempt to win aid.

Congressional Democrats have urged the White House to use money from the $700 billion Troubled Asset Relief Program, or TARP, but the administration has resisted, saying the funds are only intended for financial firms. Others have suggested using money from an Energy Department program intended to help auto makers retool to make more-fuel-efficient vehicles, but Democrats have largely balked at that idea.