Planet Gore

A Green-Tinged Bailout Won’t Save Detroit

Detroit, Mich. — While Planet Congress argues over whether to spend $25 billion to make the deck chairs greener on Detroit’s sinking Titanic, American bankruptcy lawyers have been coalescing around the idea that the Big Three ought to be exploring a government-supported bankruptcy plan to save the ship.

Lynn LoPecki, a law professor at UCLA and Harvard law schools, says there is a growing academic consensus for a so-called “public debt-in-possession” (or public DIP) in which the feds would be the primary lender in bankruptcy court. A public DIP would both guarantee that Detroit automakers do the wrenching work necessary to transform their companies, while also encouraging other lenders to join in bankruptcy financing in a difficult credit climate.

LoPecki “disputes as unlikely” the Detroit/DC conventional wisdom that the auto companies would fail in bankruptcy. “They are likely to emerge,” he says. “Very large companies rarely do not emerge from Chapter 11.”

What he does not dispute is that Big Three execs would lose their jobs – which is why it is in their self-interest to scare Congress into believing that bankruptcy would be apocalyptic. For its part, Congress is also incentivised against bankruptcy since it would likely significantly diminish the power of auto unions – a major source of Democratic funding.

If such a bankruptcy filing were allowed to take place, says LoPecki, the companies would emerge much smaller — but also better able to compete against their Japanese rivals.

Michael E. Levine, Distinguished Research Scholar and Senior Lecturer at NYU Law School, concurs. Levine admits the difficulty of bankruptcy in the current credit squeeze, and sees a public DIP as a solution. “The point,” he says, “is for the government to pay for surgery, not just for a transfusion.”

Bill Swelbar, an engineer and consultant now at MIT, brings an airline-bankruptcy perspective. He says the events of 9/11, a “freak act of nature” not unlike the current financial crisis, was a disguised blessing for airlines because it exposed their financial weaknesses and forced them – through bankruptcy – to deal with fundamental structural problems. U.S. airlines . . . meet U.S. autos.

Swelbar also questions the Washington conventional wisdom that no one will buy cars from bankrupt companies. He remembers similar fears about airlines. “Everyone said no one will ever fly a bankrupt airline because they will be unsafe,” he says. It was also said that consumers would not purchase tickets for fear no airline would exist when the trip came due.

Such fears were overblown. Yes, some airlines saw declines in ridership. But ultimately, bankruptcy brought a healthier, more competitive industry that has weathered even the recent oil price and financial storms. In fact, says, Swelbar, today’s airline industry is also “greener” because they’ve had the fiscal room to maneuver and negotiate more fuel-efficient fleets.

Planet Congress take note.

Most Popular

Elections

The Debate Dumpster Fire

On the menu today: You know what we’re talking about today -- that Godforsaken festival of incoherent crosstalk that was allegedly a presidential debate. It Figures That a Dumpster Fire of a Year Like This Would Bring Us a ‘Debate’ Like This Last night, I thought the first presidential debate of the ... Read More
Elections

The Debate Dumpster Fire

On the menu today: You know what we’re talking about today -- that Godforsaken festival of incoherent crosstalk that was allegedly a presidential debate. It Figures That a Dumpster Fire of a Year Like This Would Bring Us a ‘Debate’ Like This Last night, I thought the first presidential debate of the ... Read More
Elections

Trump Did Himself No Favors

The debate was a remarkable example of the fact that Donald Trump, the most self-serving man in America, doesn’t know how to do himself any favors. For the first ten or twelve minutes of the debate, he was walking away with it — Trumpy, sure, but in control and surprisingly reasonable-sounding. If he had ... Read More
Elections

Trump Did Himself No Favors

The debate was a remarkable example of the fact that Donald Trump, the most self-serving man in America, doesn’t know how to do himself any favors. For the first ten or twelve minutes of the debate, he was walking away with it — Trumpy, sure, but in control and surprisingly reasonable-sounding. If he had ... Read More
Elections

On Last Night’s Debate

The fact that I believe the debate was unwatchable last night does not mean I believe President Trump did not have some good moments. And the fact that I imagine it was a net-net win for Joe Biden does not mean he did not have some utterly awful moments. Yet the unwatchability of the debate -- the cringe factor ... Read More
Elections

On Last Night’s Debate

The fact that I believe the debate was unwatchable last night does not mean I believe President Trump did not have some good moments. And the fact that I imagine it was a net-net win for Joe Biden does not mean he did not have some utterly awful moments. Yet the unwatchability of the debate -- the cringe factor ... Read More

Trump vs. Trump

I don’t wish to discuss the debate because I’m not a masochist. It was a crap crêpe. A turd taco. Fecal flan. The American people could be forgiven for rising as one and declaring to Donald Trump and Joe Biden, “Everyone in this country is now dumber for having listened to you. I award you no points, and ... Read More

Trump vs. Trump

I don’t wish to discuss the debate because I’m not a masochist. It was a crap crêpe. A turd taco. Fecal flan. The American people could be forgiven for rising as one and declaring to Donald Trump and Joe Biden, “Everyone in this country is now dumber for having listened to you. I award you no points, and ... Read More

Let Them Fight!

We need to blow up the traditional presidential-debate formats — not because there was too much mayhem in last night’s contest, but because the mayhem wasn’t constructive enough. The Commission on Presidential Debates is now apparently considering allowing moderators to cut candidates’ mics mid-debate. ... Read More

Let Them Fight!

We need to blow up the traditional presidential-debate formats — not because there was too much mayhem in last night’s contest, but because the mayhem wasn’t constructive enough. The Commission on Presidential Debates is now apparently considering allowing moderators to cut candidates’ mics mid-debate. ... Read More
Elections

A Lot of Things Are ‘Possible’

It’s possible that the overwhelming majority of the polls are wrong, and that Donald Trump is not trailing Joe Biden by about six points nationally, by about five or six points in Pennsylvania, by about five points in Michigan, by five points in Wisconsin, by about two points in Arizona. It’s possible Trump ... Read More
Elections

A Lot of Things Are ‘Possible’

It’s possible that the overwhelming majority of the polls are wrong, and that Donald Trump is not trailing Joe Biden by about six points nationally, by about five or six points in Pennsylvania, by about five points in Michigan, by five points in Wisconsin, by about two points in Arizona. It’s possible Trump ... Read More