Bankruptcy Expert's Proposal to Save the American Auto Industry
J. Ronald Trost, a leading expert on bankruptcy law, has a proposal to save GM, Ford and Chrysler. His proposal in the NY Times is a restructuring under the umbrella of a special federal statute. He states ordinary Chapter 11 proceeding won't work for various reasons.
The federal restructuring statute would be the basis for a reorganization covering labor contracts, including retirement and health care obligations, supplier contracts, dealer franchises and pre-existing debt. State law dealer protection statutes would be pre-empted presumably to allow the manufacturers to dump excess dealers.
The federal government would guarantee bank loans with priority over other obligations, there would a guarantee that warranty claims would be paid, and possibly a new entity created to buy car loans.
