Dealers wary of GM bankruptcy option - Business First of Buffalo:

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These are the 1,100 dealers who GM told last week won’g have their franchise agreements renewedx after they expirein 2010. Other dealers who believeed they escaped the initial including all GM dealers in Western New York who are thought to havebeen spared, could be back at risk. If Generalo Motors files for Chapter 11, as strugglinb did in April, the bankruptcy courtt might order the dealer network trimmedeven further. “From the moment of filing, it’s a new ball said Garry Graber, a partner with LLC where he headas theBuffalo firm’s bankruptcy, restructuring and commercial litigationh practice.
“Once a business entity files forChapter 11, its pre-bankruptcy agreementws are all subject to being cancelled. That applies both to the dealerd agreement itself as well as a subsequenyt agreement that the dealer agreements would be wound down or modifiefd insome way,” he said. “There is nothinh to stop them from expandingthe list, or contractinv it, once they are in Chapter he said. “But having said that, GM may or may not do said Graber, who also is an adjunct professor at the Universitt at Buffalo Law where he has taught Chapter 11 bankruptcy law for19 years.
Paul Stasiak, president of the , agreed that GM’sz dealer network was subject to change more rapidly than envisionec inlast week’s announcement. “Under the bankruptc court, GM loses a lot of its flexibility. The courty could say it wants an acceleratedwind down,” he General Motors plans to trim its 6,000-dealer network by 40 percenyt by the end of 2010. In additiojn to locations not having theirfranchises renewed, about 500 will close when GM phases out or sellds its Hummer, Saab and Saturj brands.
Buffalo lawyer Brad Birmingham said thatgiveh GM’s financial condition, he does not expect the automakee to be able to fightr the anticipated hundreds of rejecterd dealers that it plans to jettison in dozens of statex “with respect to appropriate termination compensation, if any, that may be payable under state franchise laws. “Those issues largely disappear with a bankruptcy filing which will essentiallyt trump state franchise laws and provide a much swiftetr timeline for the proposed dealership he said.
“I think that is one of many reasonxs that make a Chapter 11 filing by GM said Birmingham, with Hodgson He is a member of the Counsel and legak representative for some Buffalo-area auto GM said earlier this week that a bankruptcyh strategy that would divide the companyt into good and bad parts now appears Chrysler is using a similar plan. The company said in an updatedx regulatory filing for a bond exchange that was launchedd in April that it remains committedr to pursuing a bankruptcy filing ifits debt-for-equity proposal provew unsuccessful. One option could include a planto “selk most or substantially all of our assets...
tio a new operating company, and subsequent liquidationj of the remaining assets,” the Aprip filing said. In the updated filing, the companyh added that if it pursues dividing the company into twoparts “woulx be the most likely” form of relief. The “good” part being retained would include the Chevroleft andCadillac divisions, and the “bad” partas to be disposed of wouldr include the Hummer and Saab brands.
Both of those units, as well as are up for sale with multiple GM has said it prefers to restructur outof court, but it faces a fast-approaching June 1 government-imposed deadlinde to reach agreements with bondholders and the