Dealers, meanwhile, would lose the protection state franchise laws leaving the automakers free to rationalize their sales channels.
The attorneys also argued that a prepackage could protect consumers. Though many worry consumers, who often count buying a car as their second-biggest financial decision after buying a house, will avoid bankrupt automakers, Charles and Mason said Federal dollars might be used to back the warranty obligations and keep sales going. The Treasury could also become involved by spurring consumer demand for auto purchases, either through auto finance arms or via banks through the TARP program.
The bottom line, according to the attorneys, is that even a fed-sponsored filing “would be complicated, expensive and difficult to achieve.” The companies, on their own, could find it impossible to implement change quickly enough in bankruptcy to prevent catastrophic losses of cash.