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Michigan Governor Rick Snyder tapped a restructuring expert who helped successfully steer Chrysler through a government-backed bankruptcy to lead a state takeover of Detroit.
The move by a white, Republican governor to take control of a predominantly black and Democratic city has drawn intense criticism and charges of racism.
The choice of Kevyn Orr, an African American and Democrat who grew up in Michigan, should help stem some of that criticism.
Detroit Mayor Dave Bing, who has been widely praised for cleaning up after a succession of corrupt predecessors, joined Snyder and Orr for the announcement and said it was well past time to address the Motor City's troubled finances.
"We will do everything we can to be good team mates," Bing told reporters. "This city deserves that. This region deserves that. This state deserves that."
Once the fourth largest city in the United States, Detroit has seen its population shrink by more than half from 1.8 million people in 1950 to 713,000 today.
Racial tensions sparked by the civil rights movement and the devastating 1967 riots exacerbated white and middle-class flight to the suburbs. Businesses followed suit, further shrinking Detroit's tax base.
With less revenue, the city had to cut back on services, prompting more people to leave.
The birthplace of the US auto industry then saw its main employers endure round after round of mass layoffs, as factories were automated or outsourced and Asian competitors siphoned away market share.
Abandoned skyscrapers, factories and homes litter the landscape. Crime is rampant. The city can't even manage to keep all the street lights on.
Orr, whose appointment as emergency manager must still be approved by a state board, insisted he would be able to get Detroit back on track within 18 months.
"We can rise from the ashes," he said.
Emergency managers have the power to eliminate entire departments, change labor contracts, sell city assets and rewrite laws without any public review or input.
Currently in control of four smaller Michigan towns and cities and three school districts, the success rate of such managers is the subject of much debate.