Automobile Reorganization

Two veteran bankruptcy lawyers propose a new solution for the automakers problems here. Their proposal assumes a number of things that may not be true in reality. First, they assume that the creation of Amtrak and the creation of Conrail were unmitigated success stories. This might be true about Conrail, which was eventually returned to the private sector, Amtrak has not exactly been a success. Both due to the difficulties in coming up with a viable plan for a profitable passenger rail system (there has never been any reason to assume that passenger rail could be profitable), which was a key assumption in the formation of Amtrak as a private corporation, and the fact that Congress has long starved Amtrak of adequate funding that would be necessary to reach profitability or in truth a state of adequate usability on most of its routes. Amtrak just has been starved while roads and airports have had huge government subsidies thrown at them year after year. In truth, it is not necessary for Amtrak to be profitable, but that requires a different conception of its role than the one devised in 1970. It hardly seems likely that an automaker bailout structured to create a semi-private entity along these lines would not have the same difficulties in achieving appropriate funding levels to carry out its mission of maintaining an American automaker, helping preserve defense capabilities, long term job promotion or ever be returnable to the private sector. Finally, those arguing that a traditional bankruptcy reorganization under Chapter 11 would be inadequate to the task have no evidence on their side. Assuming the Federal government will support the automakers with DIP financing, creating a new mechanism for the automakers seems unnecessary.