 EmilyChasan writing for Reuters reported that some auto dealers thatChrysler LLC plans to close are beginning a challenge to theautomaker’s plans to quickly sell itself in bankruptcy.
The group, which calls itself the “Committee of Chrysler AffectedDealers,” filed papers on Tuesday asking the bankruptcy court to delayhearings that would approve the sale and allow Chrysler to rejectalmost 800 of its dealership franchise agreements, or about 25 percentof its overall dealer network.
The committee, which said it represents nearly 300 dealers in 45states, said in a statement it needed more time from the court toinvestigate the issues and present their defense.
“Chrysler’s proposed asset sale and request for immediatetermination of the dealer franchises will destroy several hundredindependent businesses, ruin the livelihoods of their owners, cause theloss of thousands of jobs and precipitate inevitable personal andbusiness bankruptcies,” Stephen Lerner, an attorney at Squire Sanders& Dempsey representing the committee, said in a statement.
The dealers are mounting the third major challenge to Chrysler’splan to sell itself to a “New Chrysler” that will be owned by thecompany’s union, Fiat (FIA.MI), and the government. The two previouschallenges have largely disbanded, as a group of dissident seniorlenders dropped their protest and the new company told concernednonunion retirees last week that it intends to continue their benefits.
But while the previous challenges have dealt with payment rights,the dealers’ challenge goes to one of the core economic issues inChrysler’s business plan.
Chrysler says it needs a smaller dealer network to be profitable.But the dealers argue they are Chrysler’s main source of revenue, bearmuch of the risk on car sales, and employ thousands of people.
In 2008, Chrysler sold about a million new cars at about 3,300 U.S.dealers compared with industry leader Toyota (7203.T), which sold about1.6 million cars at a dealer network of about 1,200 dealers, less thanhalf the number of Chrysler dealers, according to court documents.
“If you’re Chrysler and you want to have a viable business goingforward, you can’t possibly have the structure in any way, shape ormanner that you had — you have to shrink the structure,” said RichardMikels, a bankruptcy attorney at Mintz Levin.
Chrysler has argued in court documents that its dealers “compete notonly with dealers selling (Fords and Toyotas), but also with each otherin surrounding markets,” which hurts its ability to charge more for itscars.
But Chrysler’s dealers are challenging that motion, saying that“there is no evidence that by rejecting dealership agreements NewChrysler will save money to any material degree,” according to courtdocuments filed last week on behalf of Chrysler’s National DealerCouncil.
They say closing Chrysler dealerships goes against simple economicsbecause Chrysler dealers buy all of Chrysler’s cars, and customersalienated by the closing of their hometown dealer will simply be lostto other brands.
“Dealers produce revenue, not expense, for Chrysler … it isChrysler’s dealers that bear the risks and costs associated withselling Chrysler’s cars to the public,” the National Dealer Councilargued.
General Motors Corp (GM.N) has also said it plans to cut more than1,000 dealers by 2010, but those dealers would have more time thanChrysler’s terminated dealers, which are expected to lose theirfranchise agreements early next month.
The dealers, once they lose their franchise, expect to have fewoptions to save their businesses as other carmakers may not be willingto expand their dealer networks and pick up some of the closed dealers,as overall U.S. car sales are still very depressed.
Another group of terminated Chrysler dealers who say they havestronger sales than some of the dealerships that are staying open alsoplan to challenge Chrysler about the closures, according to a personfamiliar with their plans.
But the ability of any bankrupt company to pick and choose whichcontracts they want to reject is one of the chief benefits of filingfor bankruptcy at all, and Chrysler is arguing that such cuts, whilepainful, are necessary for its survival.
“The beauty of Chapter 11 is that you can accomplish these thingsthat would be very difficult outside of Chapter 11,” Mintz Levin’sMikels said. (Reporting by Emily Chasan, additional reporting by PhilWahba and Tom Hals; Editing by Gary Hill) |
發表於 2009-5-21 11:45 AM
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