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Section 3(a) of the bill provides that "[i]n order to protect assets of the Federal Government and better assure the viability of automobile manufacturers in which the Federal Government has an ownership interest" said manufacturers "may not deprive an automobile dealer of its economic rights and shall honor those rights as they existed" on the eve of a manufacturer's bankruptcy case.

Now the bill does not actually reference § 365, and one could easily question the premise of the opening clause, but I assume that this is intended to "unreject" Chrysler's unwanted dealership agreements, and thwart GM's expected move reject some of its own dealership agreements.

The thing that makes this amusing is that section 3(c) of the bill expressly states that if enacted it will have no effect on the sale orders in either chapter 11 case. In short, the dealers who are "saved" by this bill will have the dubious privilege of being dealers for liquidating corporations that no longer manufacture cars. That is, the bill does not to alter the reality that the dealers' contracts are with "old" GM and Chrysler and they are being left behind. As the dealers will say when they realize this -- "swell," or words to that effect.

Finally, there is a part of me that hesitates to point out this flaw, because, as I have argued, chapter 11 already suffers from excessive Congressional tinkering that has made it increasingly difficult to actually reorganize companies under the Code. I would also think that any attempt to do what Congress seems to want to do here might run afoul of due process and separation of powers, particularly as applied to Chrysler -- although I'm getting myself pretty far out on the constitutional law limb here and will retreat to the wonderfulness of the Bankruptcy Code at once.

UPDATE:  One way around the statutory problem I identify is to read this as an attempt to create some sort of successor liability in the reorganized companies for these contracts, essentially assigning them without using §365.  The constitutional law issues, whatever their merit, would still remain.  And I think Fiat (and maybe the Canadians) might have some problems with this -- it amounts to changing the deal after it's been closed.

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