DETROIT (Reuters) - Detroit’s retirees have bolstered their defenses against benefit cuts in the city’s bankruptcy case by hiring Ron Bloom, a chief architect of the Obama administration’s 2009 U.S. auto bailout and long-time adviser to unions in industry shake-ups.
Lazard Ltd (LAZ.N), where Bloom is now vice chairman, said it will advise a nine-member committee that represents 23,500 public sector retirees facing cuts to their healthcare and pension benefits after Detroit’s Chapter 9 Bankruptcy filing on July 18.
Benefits consulting firm The Segal Company was also hired to assist the committee, two people familiar with the matter said, declining to be named because the details are confidential.
Detroit is the largest city in U.S. history to seek bankruptcy protection and its emergency manager, Kevyn Orr, has said retiree benefits could be cut as the city struggles to pare down more than $18 billion in debt.
Roughly half of its liabilities stem from retirement benefits, including $5.7 billion for healthcare and other obligations, and $3.5 billion involving pensions.
Unions have fought back, arguing that such benefits are protected by the Michigan and federal constitutions. The retiree committee has asked the U.S. District Court in Detroit to remove the case from bankruptcy court and determine the constitutional issues.
Bloom and Orr worked together during the 2009 U.S. auto crisis that culminated in the government-backed bankruptcy restructurings of General Motors Co (GM.N) and Chrysler Group LLC, now a unit of Fiat SpA FIA.MI.
At the time, Orr represented Chrysler and worked at the law firm Jones Day. He left the firm in March when he was appointed emergency manager.
Segal declined to comment. Orr’s spokesman Bill Nowling also declined to comment.
Bloom resigned from the Obama administration in August 2011. That year he was hired as a consultant to United States Postal Service workers, who are facing big cuts under that agency’s plans for restructuring.
Bloom, who began his career with Lazard, assisted unions in key airline restructurings in the early 1990s.
He was the point man for the United Steelworkers Union during industry restructuring in the 1990s and early 2000s.
He also advised the steelworkers in 2007 when the union and the United Auto Workers agreed to the formation of a trust that would take the burden of paying for retiree healthcare away from supplier Dana Corp, which was in bankruptcy at the time.
Additional reporting by Deepa Seetharaman and Bernie Woodall; Editing by Gary Hill, Andre Grenon and Edwina Gibbs