GM, Chrysler Dealer Groups Retain Law Firms
29 April 2009 - 7:41PM
Dow Jones News
National groups representing thousands of General Motors Corp.
(GM) and Chrysler LLC auto dealers have hired law firms to protect
them against potential bankruptcy filings by the auto makers.
Lawyers also will advocate for GM franchise owners, who are
under increasing pressure to go out of business as the auto maker
races to downsize in an effort to avoid a government-led
bankruptcy.
GM's National Dealer Council retained the law firm of Orrick
Herrington & Sutcliffe LLP to help ensure dealers being forced
to close get payouts they're owed from the auto maker, according to
a memo sent to dealers.
The auto maker is looking to eliminate 2,600 dealers by 2010 as
part of a recovery plan that aims to keep the company out of
bankruptcy court by slashing costs and restructuring debt.
GM, which has said it expects minimal costs in reducing its
dealer body, will inform dealers within the next two weeks whether
they are among those marked to close.
"Under these circumstances, we believe it is critically
important that action be taken on behalf of dealers," the letter to
GM dealers said. "The best way to achieve this goal is for the
(National Dealer Council) immediately to engage a major national
law firm."
The firm will participate in negotiations with GM on dealers'
behalf and work with lawyers retained by individual dealers.
Dealers operate under contracts with auto makers that require the
company to cover obligations, ties to warranty repairs, inventory
buy downs and floorplan assistance payments.
It also will help the dealer council set up a Web site dealers
can go to for regular updates on GM's restructuring or bankruptcy
plans.
Chrysler's dealer council, meanwhile, has engaged the firm of
Arnold & Porter LLP to represent its dealers in case the auto
maker is forced to file for bankruptcy protection as early as
Friday, several dealers said.
Chrysler is attempting to win union and creditor concessions and
sign a merger deal with Italy's Fiat SpA in order to receive more
U.S. government funding and avoid bankruptcy.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.
-By Jeff Bennett, Dow Jones Newswires; (248) 204-5542;
jeff.bennett@dowjones.com