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Abbott: GM deal violates Texas laws | Postcards.
Texas Attorney General Greg Abbott, charging that General Motors is attempting to use its bankruptcy to violate state law governing dealerships, announced this afternoon that he is challenging the troubled automaker’s proposed restructuring in court.
In a filing with the U.S. Bankruptcy Court for the Southern District of New York, Abbott alleges that new franchise agreements that GM is requiring Texas’ 415 GM dealers to sign violate state law.
By requiring its dealers to market only GM brands.
By forcing its dealers to order new GM vehicles, even the models a dealer does not believe will sell.
By limiting its dealers’ warranty claims.
By allowing GM to modify or terminate franchise agreements, in violation of current law.
“GM is putting dealerships across Texas — and thousands of their employees — at risk,” Abbott said. In an unprecedented move, GM — which will majority owned by the federal government — claims that states’ rights and states’ laws that protect dealerships can be ignored at GM’s choosing. In doing do, the federally owned GM guts Texas statutes that regulate car dealers and flaunts U.S. Supreme Court precedent that upholds our state-based dealership structure.”
If successful, the legal challenge could throw an unexpected delay into GM’s plans to perhaps emerge from bankruptcy as a new, leaner company within 60 days.
A court hearing in the GM bankruptcy case is scheduled June 30. Abbott said his challenge will be considered at that time.
Texas has 415 GM dealerships, many of which also sell other brands.
Under current state law, the Motor Vehicle Division of the Texas Department of Transportation oversees dealer franchising for GM and other automakers. Abbott said that if GM were allowed to proceed with its new franchise agreements unchallenged, “GM would have a different standard than Ford or Chrysler or other automakers.”
Abbott said GM is requiring its dealers in Texas and other states to sign the new franchise agreements “if they want to be a part of the New GM operation.”
“The new agreements, however, amount to take-it-or-leave-it ultimatums that force current dealers to waive state laws that were enacted to protect businesses from those very kinds of oppressive moves. If dealers don’t sign the contract, they will lose their business.”
Abbott said the State of Louisiana also is challenging the franchise revisions, telling GM in a latter that “GM will not be allowed to market cars in Louisiana unless it follows state law” there.
A GM spokesperson had no immediate comment, saying the company had not seen Abbott’s court filing.
According to the Texas Automobile Dealers Association, the GM franchises in Texas are largely family-owned businesses that employ 27,000 people and generate billions of dollars in annual sales.
“The new federally controlled GM that emerges from bankruptcy wants to be freed from Texas laws that require it to deal fairly with local dealerships,” Abbott said, citing a string of court rulings that bolster Texas’ position. “Its plan will move the business toward a command control economy model and away from a free-market model.”
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Tagged bankruptcy, closing dealerships, federal government, franchise agreement, General Motors, state, state law, states' rights, Texas Attorney General Greg Abott, Texas Automobile Dealers Association, Texas statues, the Motor Vehicle Division of the Texas Department of Transportation, warranty claims
Washington Post Staff Writers
Tuesday, June 9, 2009
The U.S. Supreme Court yesterday held up the sale of Chrysler’s assets to Italian automaker Fiat, at least temporarily interrupting the Obama administration’s massive and speedy restructuring of the U.S. auto industry.
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The decision buys the court time to consider objections filed over the weekend, and it comes as the clock is ticking. Fiat can back out of the deal if it is not finalized by Monday, and the government has warned that the only alternative would be to force the nation’s third-largest automaker into liquidation, throwing the industry in turmoil and leaving tens of thousands of people without jobs.
The stakes may be higher for the Obama administration: If the court backs some of the claims, it could disrupt plans to rescue a hrGeneral Motors and weaken the government’s hand in stabilizing the troubled economy.
“Every day that Chrysler remains in bankruptcy without consummating the sale threatens to postpone the resumption of production even further and to prolong the period of $100-million-per-day losses” financed by taxpayers, Elena Kagan, the U.S. solicitor general, said in a 26-page filing with the high court.
A host of business and conservative groups applauded Ginsburg for standing up to what one called the Obama administration steamroller. And Congress is beginning to stir. Legislation is being drafted to reverse decisions by Chrysler and GM to close thousands of dealerships. The Senate Banking Committee, meanwhile, is preparing to hold a hearing this week on the government’s role in the auto rescue.
The significance of the court’s action remains to be seen. The language Ginsburg used in her order usually signals a delay of short duration.
There could be several explanations, not the least of which is that the justices may not have had time to fully consider the request. Court filings from those opposing the deal began arriving over the weekend and into Sunday. The government’s response in opposition did not arrive at the court until shortly before justices convened yesterday at 10 a.m.
The petitions are directed at Ginsburg because she is the justice responsible for the circuit that includes New York, where the suit was filed. She may decide the stay issue on her own or refer the question to the full court. If it’s the latter, that could explain the need for more time. The full court would have to vote on whether to hear the merits of the case.
“We understand this to be an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay,” an administration official said. A Chrysler spokesman said the company had no immediate comment.
Richard Mourdock, Indiana state treasurer, said he hoped the court would agree to a hearing. The stay, he said, “moves us one step closer to what I’ve argued for all along, which is a fair hearing by the highest court.”
Fiat representatives did not respond to phone calls yesterday. But in arguing against a stay of the sale in lower courts, Fiat said it was concerned about Chrysler’s eroding value.
Tagged bankruptcy, Chrysler, Fiat, Obama administration, Ruth Bader Ginsburg, the Supreme Court, U.S. Auto Industry
Sunday, May 31, 2009
Only 21% of voters nationwide support a plan for the government to bail out General Motors as part of a structured bankruptcy plan to keep the troubled auto giant in business.
The latest Rasmussen Reports national telephone survey finds that 67% are opposed to a plan that would provide GM with $50 billion in funding and give the government a 70% ownership interest in the company.
Even when presented with the stark choice between providing government funding or letting GM go out of business, only 32% of voters support the bailout. Most voters (56%) say it would be better to let GM go out of business.
As on many issues, there is a huge gap between the views of the Political Class and the rest of the nation. By a two-to-one margin, the Political Class says it is better to provide the bailout funding than to let GM fail.
Most political conservatives and moderates say it’s best to let the company fail, but liberals are evenly divided. A majority of voters in all age groups say it’s better to let GM go out of business. So do 59% of men and 53% of women.
An earlier survey found that 76% believed economic recovery was possible even if GM fails.
Looking back at the bailout funding already provided, 60% say the auto bailouts were a bad idea. Two-out-of-three believe that most of the bailout money is going to those who caused the economic crisis.
Only 18% say the federal government will do a good job running GM. But they suspect the government will do all it can to help its investment. After taking ownership of GM and Chrysler, 57% expect the government will pass laws and regulations giving those companies unfair advantages over others.
Despite that, 61% say Ford is more likely to survive than either GM or Chrysler. Ford has at least one big advantage over its Detroit-based competitors: 51% of all Americans say they are more likely to buy a car from Ford because it did not take bailout funding from the government. Just 12% are less likely to buy from Ford for that reason, while 33% say the bailouts will have no impact on their car-buying decisions.
Looked at from the other perspective, just 12% would prefer a car from a bailed-out automaker
Ford is viewed favorably by 64% of Americans. Ratings for GM and Chrysler are much lower.
Earlier surveys found that only 25% would buy a car from a company in bankruptcy.
Voters consistently have opposed all forms of bailout funding. Fifty-four percent (54%) opposed bailouts for the automakers, the finance companies and homeowners struggling to pay their mortgages. There is strong opposition to federal assistance for the financially strapped state of California. Seventy-six percent (76%) opposed the bailouts provided for insurance companies.
Yet while most voters were against bailouts for the failing auto companies and the financial industry, the federal government provided support for both. Some critics, particularly those who favor the auto industry, have noted that the terms and tone of the bailouts were markedly different, however. An analysis by Scott Rasmussen explained the underlying reason for the double standard.
Not surprisingly, most Michigan voters favor government loans for GM and Chrysler. Michigan voters also believe the auto bailouts have been good, but the bank bailouts are bad.
Nationwide, opposition to bailouts helped spur the “Tea Party” protests which were viewed favorably by 51% of voters.
via Rasmussen Reports™: The Most Comprehensive Public Opinion Data Anywhere.
Tagged auto industry, bailouts, bankruptcy, economic crisis, financial industry, Ford, GM, government
Chrysler files for bankruptcy protection, will partner with Fiat – USATODAY.com.
From staff and wire reports
WASHINGTON — Chrysler filed for bankruptcy protection Thursday and will form an alliance with the Italian carmaker Fiat Group in an effort to revive the nation’s ailing third-largest automaker.
The Obama administration said it had long hoped to stave off bankruptcy, but it became clear that a holdout group of creditors wouldn’t budge on proposals to reduce Chrysler’s $6.9 billion in secured debt. Clearing those debts was a needed step for Chrysler to restructure by a government-imposed Thursday deadline.
BANKRUPTCY FILING: Chrysler’s Chapter 11 petition
Chrysler now has “a chance not only to survive but thrive” thanks to the deal with international car company Fiat and a $6 billion loan from the government, President Obama said Thursday.
He said the company’s decision to file for bankrupcy “is not a sign of weakness,” but rather a necessary step that will allow the company to survive.
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Chrysler CEO Robert Nardelli says he will step down after the company emerges from bankruptcy protection.
Nardelli says on the CNBC cable network that the Treasury Department did not ask him to resign. But he felt it would be an appropriate time to leave after bankruptcy.
NARDELLI STATEMENT: CEO’s letter to Chrysler employees
Chrysler filed for Chapter 11 bankruptcy protection in New York on Thursday with the hopes of emerging in as little as 60 days under the new partnership with Fiat. The government, which has already poured $4 billion in loans into Chrysler, would provide up to $8 billion more to carry the company through bankruptcy, said senior administration officials speaking on condition of anonymity. The government will also help appoint a new board of directors.
The deals give Chrysler “a new lease on life,” Obama said.
Under bankruptcy, Chrysler would still sell cars and the government would back its auto warranties. But Chrysler said Thursday that it will idle its plants during the legal proceedings.
After emerging from bankruptcy, the Auburn Hills, Mich.-based automaker would end up owned by the United Auto Workers union, the U.S. government and Fiat. The Canadian and Ontario governments, which are also contributing financing, would have small stakes.
But Fiat, which the Obama administration hopes can jump start Chrysler with its fuel-efficient and lower-emission technology, could end up the majority stakeholder. Fiat would initially get 20%, a share that could rise to 35% if certain benchmarks are met. Fiat said Thursday it could get an additional 16% by 2016 if Chrysler’s U.S. government loans are fully repaid.
PHOTOS: What Fiat is making these days
Obama said Chrysler Financial, the arm of the company that makes loans to buyers and to dealers to finance their inventories, will be merged into GMAC Financial Services, once General Motors’ finance arm. The new GMAC will get government support. Chrysler’s base of dealers would also be pared down.
The president, who has previously urged Americans to consider refinancing their homes to save money and avoid forclosure, on Thursday urged people to buy American. “If you are considering buying a car,” he said, “I hope it will be an American car.”
The Treasury Department’s auto task force has been racing in the past week to clear the major hurdles that prevented Chrysler from coming up with a viable plan to survive the economic crisis ravaging nation’s automakers.
Along with the Fiat deal, the UAW ratified a cost-cutting pact Wednesday night.
Treasury reached a deal earlier this week with four banks that hold the majority of Chrysler’s debt in return for $2 billion in cash.
But the administration said about 40 hedge funds that hold roughly 30% of that debt also needed to sign on for the deal to go through. Those creditors said the proposal was unfair and they were holding out for a better deal.
“I don’t stand with them,” Obama said.
A person briefed on Wednesday night’s events said the Treasury Department and the four banks tried to persuade the hedge funds to take a sweetened deal of $2.25 billion in cash. But in the end, this person said most thought they could recover more if Chrysler went into bankruptcy and some of its assets were sold to satisfy creditors. This person asked not to be identified because details of the negotiations have not been made public.
On Thursday, a group of funds identifying themselves as 20 of Chrysler’s “non-TARP lenders” released a statement saying they had been sidelined during negotiations between lenders and the government. The group, which said it holds $1 billion in Chrysler debt, complained that the four banks were “obviously conflicted” because they had accepted money from the government’s Troubled Asset Relief Program while they had not gotten TARP money.
The group said its offer to the Treasury Department to reduce its claim to 40% was “flatly rejected or ignored.”
Fiat is getting its stake in Chrysler for giving the company access to its fuel-efficient technology, a move toward cleaner cars that the Obama administration thinks is critical to Chrysler’s future survival. The company has committed to building Fiat cars in Chrysler factories, to be sold as Chryslers.
Obama’s auto task force in March rejected Chrysler’s restructuring plan and gave it 30 days to make another effort, including a tie-up with Fiat.
Chrysler’s bankruptcy filing said it owes more than $10 million apiece to 20 of its unsecured creditors, many of whom are vendors and suppliers.
At the top of that list were: Ohio Module Manufacturing Co. ($70.3 million), BBDO Detroit Inc. ($58.1 million), Johnson Controls Inc. ($50.3 million), Continental Automotive ($47 million), Cummins Engine Co. ($43.9 million) and Germany-based Germersheim Spare Parts ($36.2 million).
Contributing: USA TODAY’s Mimi Hall and the Associated Press’ Ben Feller reported from Washington, USA TODAY’s Sharon Silke Carty and the Associated Press’ Tom Krisher reported from Detroit, Colleen Barry in Milan, Italy, Kimberly S. Johnson in Detroit and David Eggert in Lansing, Mich.
Tagged bankruptcy, Chrysler, Fiat, Robert Nardelli, United Autoworkers Union