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Little Engine That Could? Government's Role in GM Bears Resemblance to Amtrak Route

Banners hang on the wall of the General Motors Pontiac plant in Pontiac, Mich., which is expected to close, in this file image from April 26. (Reuters Photo)

General Motors is trying to prove that it is the little engine that could. But the bankrupt automaker may never fully climb the mountain ahead of it, if Amtrak is any example. 

Some analysts say the federal government's effort to prop up the nation's largest auto manufacturer is eerily similar to a 40-year effort to revive the nation's ailing railroad system. Billions of taxpayer dollars later, Amtrak still needs the government to survive -- and critics say General Motors appears to be headed down the same track.

"I see no hope whatsoever for the situation," said Wendell Cox, a policy consultant who sat on the government-appointed Amtrak Reform Council a decade ago and draws parallels to the GM intervention today.

The Obama administration is committing $50 billion to General Motors -- $30 billion on top of the $20 billion it has already invested. Administration officials will not speculate on when taxpayers may see a return on the White House-engineered investment, but they insist that Washington will cut off Detroit after that and will be a "passive" investor.

President Obama said Monday the U.S. government, which now owns 60 percent of GM, wants to prop up the company and then "get out" of the auto business. Under the restructuring plan, the Canadian government will take a 12.5 percent stake, and the United Auto Workers will have a 17.5 percent stake. Bondholders receive 10 percent.

Critics say this looks like Amtrak all over again.

Analysts said the government's hope of creating an efficient mass transit service through a partial nationalization of the rail system was stymied by its inability to get tough on unions and rein in labor costs. The same could hold true, they say, as the Obama administration deals with the UAW.

Amtrak has fielded criticism over the years for being guided by officials with little or no transit experience. Today, Obama's Auto Task Force has a combined experience of zero years in the auto industry.

With Amtrak, the government got too involved in decision-making, leading to inefficiencies in the system that would never be corrected, say analysts. Since its creation in 1970, Amtrak has sucked up $30 billion in taxpayer money, and the money is still flowing. The original aid package from Congress in 1970 was $340 million with an expectation the railroad would make a profit in five years.

The potential parallels are worth being concerned about, critics say.

"I think the $50 billion might as well be kissed goodbye. I would expect that this is just the beginning," Cox, principal at the Wendell Cox Consultancy, said of the GM deal.

"I think the long-term outcome will be the same," said Ronald Utt, a senior research fellow at the conservative Heritage Foundation. "It's unlikely to ever recover the huge investment that's been made in it, and you will then be carrying this forever and ever and ever. (The government has) been carrying Amtrak now for more than 35 years."

Conservatives in Washington treated Monday's announcement with a hefty dose of skepticism. They called for a clearly stated exit strategy and said GM's success is by no means assured.

"I think that President Obama is planning on staying in the automobile industry for quite some time," Rep. Pete Hoesktra, R-Mich., told FOX News Radio. 

"Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability?" House Minority Leader John Boehner said in a written statement.

Though the rhetorical question might sound like a recycled GOP talking point, the analysts who spoke to FOXNews.com say the fear is justified. The government will have a hard time resisting getting closely involved in GM management, leading to the kind of problems that dogged Amtrak over the decades.

Utt and Cox said parochial, political interests have driven Amtrak to make ineffective decisions -- like maintaining costly, long-distance lines and setting up inefficient routes that detour through low-population areas.

Amtrak has experienced a boost in ridership recently, which its management attributes in part to high gas prices and better service. Though it is still in the red, Amtrak reported a record 28.7 million passengers in fiscal year 2008, marking its sixth straight year of record ridership.

The company notes on its fact sheet that "no country in the world operates a passenger rail system" without public support.

At the same time, Amtrak reported earning $2.45 billion in fiscal year 2008, and racking up $3.38 billion in expenses. Congress last year committed another $13 billion over five years to the rail service, with proponents of the investment saying at the time that the service had been underfunded for too long and this would finally help "rebuild" Amtrak.

It's unclear whether that will happen. And it's unclear whether the Obama administration will be able to exit its budding relationship with GM as quickly and efficiently as it hopes.

Obama on Monday said the government would act as "reluctant shareholders" and has "no interest" in running GM -- though the U.S. federal government will name a majority of board members.

Obama said the proceedings, though painful for all stakeholders, would "mark the end of an old GM and the beginning of a new GM." He held up Chrysler's quick, month-long bankruptcy proceedings as evidence that such a restructuring can be accomplished and that his critics were "wrong."

Rep. John Dingell, D-Mich., issued a statement saying he has "every confidence" GM will emerge at the top of the global automotive sector.

With more plants and dealerships set to close and more jobs expected to be lost as a product of the bankruptcy proceedings, the auto workers also claims it has made sacrifices -- brushing off suggestions that it stands to reap benefits from bankruptcy.

"We gave Citgroup hundreds of billions of dollars and AIG hundreds of billions of dollars with no accountability," said Brian Fredline, president of the UAW's Local 602 chapter in Lansing, Mich. 

With GM, "We know where that money's going. It's going to support American industry and American jobs, and that's how it will be spent. And if you want to get that taxpayer money back, buy a GM product. You'll like it."

FOXNews.com's Judson Berger and FOX News' Major Garrett contributed to this report.