GM may face dealers in court

The biggest road block to a quick restructuring of GM (GM) in a Chapter 11 filing may be its own dealers. Chrysler dealers are challenging that company's sale of assets. If their case gains momentum, it could disrupt GM's plan to quickly sell off its assets.

According to Reuters, "Some auto dealers that Chrysler LLC plans to close are beginning a challenge to the automaker's plans to quickly sell itself in bankruptcy." GM is hoping to be able to sell its most healthy businesses to the U.S. government within weeks of going into court with a restructuring plan.

Can the Chrysler dealers do what the Chrysler creditor could not? The judge in that case ruled that it was in the best interests of the company to strip bondholders of the value of their holdings in favor of expedient action to keep the company operating.

Chrysler dealers may have a strong argument that the car company meant to strip them of their franchise agreements without going through the process mandated in their dealer agreements.

GM plans to close 1,100 dealers as part of its restructuring. If the Chrysler dealers have a case, the GM dealers may use the same tactic. That could be all that stands in the way of GM getting what it wants from creditors and the United Autoworkers Union, and would be one more obstacle to keep GM from dodging a long stay in the courts.

Douglas A. McIntyre is an editor at 24/7 Wall St.


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