The Obama administration has been racing to complete a deal with Fiat SpA purchasing Chrysler, and blowing thru bankruptcy court at breakneck speeds.
On May 2nd, I posted the Chicago style strong arm tactics used on some of the secured investors, represented by Bankruptcy Attorney, Tom Lauria of White & Case. Two days later, I was pondering the possibility of political blackmail… and then, 24 hours later, the client being strong armed silenced Lauria in the press.
All seemed to flow along without major headlines until, late last week, Judge Arthur Gonzalez approved the sale of most of Chrysler’s assets to Italian automaker Fiat SpA, leaving 789 Chrysler dealerships with the “Old Chrysler” in bankruptcy, along with unwanted factories. According to the NY judge, a bankrupt manufacturer didn’t need a dealership network.
“Absent a car manufacturing business, the dealerships would not seem to serve any purpose for the debtor,” Gonzalez said, but added there may be a case for the dealers to pursue damages.
huh? Absent “.. a car manufacturing business..”?? Just what is it Fiat is buying, if not a car manufacturing business?
In response to the judicial blessing, Tom Lauria and three of his state pension and construction funds clients asked SCOTUS to step in, staying execution of the sale to renegotiate the terms that left secured investors at the bottom of the barrel, and elevated the unions and government to the top tier positions. And Lauria and clientele were not alone.
Also filing emergency papers at the high court Sunday were lawyers representing consumer groups and individuals with product-related lawsuits.
An appeals court in New York approved the sale Friday, but gave objectors until Monday afternoon to try to get the Supreme Court to intervene. Chrysler LLC wants to sell the bulk of its assets to a group led by Italy’s Fiat Group SpA as part of its plan to emerge from bankruptcy protection.
The emergency requests went first to Justice Ruth Bader Ginsburg, who handles such matters from New York. She can act on her own or refer it to the entire court.
The Indiana State Police Pension Fund, the Indiana Teacher’s Retirement Fund and the state’s Major Moves Construction Fund claim the deal unfairly favors the interests of Chrysler’s unsecured stakeholders ahead of those of secured debtholders such as the funds.
The funds are also asking SCOTUS to consider the Constitutionality of using the TARP funds, only allowable for financial institutions, to supply Chrysler’s bankruptcy protection financing without Congressional authority.
About bloody time….
Breaking today, the Supreme’s put a stay on the sale’s execution, as the court gathers more data, and schedules a hearing.
In the meantime, all is not smooth in Obama’land Auto Sales. House Majority Leader Steny H. Hoyer and Reps. Chris Van Hollen and Daniel Maffei are circulating a letter to the POTUS amongst the left wing party, gathering signatures. But of course, it is tempered by the token “butter up”… but this is a push-back by the Congressional Obama faithful that is hard to ignore.
Dear President Obama:
We are writing to express our concerns about General Motors’ and Chrysler’s decision to close profitable automobile dealerships across the country, and urge you to ask GM and Chrysler to delay final action on proposed closures pending further review of the decision to consolidate dealerships and the process by which Chrysler and GM selected the dealerships to close.
Closing these dealerships will put over 100,000 jobs at risk at a time when our country is shedding jobs at an alarming rate. We also question the criteria being used to determine which dealerships should be closed and the fundamental fairness involved in this effort. It is our view that the market rather than leaving it up to the manufacturers whose poor leadership contributed to their demise. Furthermore, we believe car dealers will be key players in any effort to revive the American auto industry.
We believe the dealerships are one of the auto industry’s key sources of strength and the manufacturers should continue to honor their agreements and contracts. The dealerships, and their more than 1 million employees, form personal relationships with customers that often contribute to brand loyalty and will be key to General Motors’ and Chrysler’s recovery following this economic downturn. While we understand the desire to reduce the number of unprofitable dealerships, no one has yet sufficiently explained the need to close profitable dealerships.
We recognize that efforts by your Auto Task Force prevented the total liquidation of General Motors and Chrysler, as well as their dealership networks. We commend your efforts to help these businesses survive these challenging economic times.
However, we are concerned that manufacturers are closing profitable dealerships to circumvent current contracts which could require expensive buy-outs under normal conditions. We are also concerned about allegations that dealers that have previously stood up for their rights against the manufacturers are being targeted by these closures. We believe that the forced closures of profitable dealerships needs to be scrutinized by the Task Force to prevent additional future financial loses to General Motors and Chrysler and job loses across the United States
We may consider legislative proposals to ensure that dealers and their employees are treated fairly, and we look forward to your timely response.
It was just over a week ago that some internet bloggers saw what they consider a suspicious link between dealerships being closed and political leanings, while the Huffpo crowd argues it’s not surprising that car dealers are “overwhelmingly Republican”.
“It shouldn’t be any surprise, by the way, that car dealers tend to vote — and donate — Republican. They are usually male, they are usually older (you don’t own an auto dealership in your 20s), and they have obvious reasons to be pro-business, pro-tax cut, anti-green energy and anti-labor. Car dealerships need quite a bit of space and will tend to be located in suburban or rural areas. I can’t think of too many other occupations that are more natural fits for the Republican Party. Unfortunately, while we are still a nation of drivers, we are not a nation of dealers.”
sigh… more “categories” and “classes” for America, thanks to the “tolerant” party.
For now, it’s another hurry up and wait scene. The funds and pensions seek a legitimate restructuring of the Chrysler break up, as well as some answers as to the ability of WH to ignore bankruptcy law, and dictating the terms favorable to the unsecured investors and unions. Additionally, there’s the pesky question as to misuse of TARP funds by the power grabbing WH and auto czars without Congressional approval… something the Dems tended to ignore in their letter of complaint.
Personally, I’m more interested in the interference in contract law aspect. I have no doubt that an Obama lovin’ Congress would be happy to go back and amend last fall’s TARP rules to grant Obama his additional powers retroactively. But where in the Constitution does the ability of the Executive Branch to usurp Bankruptcy and Contract law reside? I suggest it doesn’t…
This is one SCOTUS decision I’m anxious to hear.
Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.