Saturday, June 13, 2009

Isakson Co-Sponsors Legislation to Force GM, Chrysler to Reimburse Rejected Auto Dealerships

Bill Also Gives Dealerships At Least Six Months to Sell Off Inventories

U.S. Senator Johnny Isakson, R-Ga., announced Friday that he is co-sponsoring legislation by U.S. Senator Bob Corker, R-Tenn., that would require Chrysler and General Motors to use any funding they receive from the U.S. Treasury while they are in Chapter 11 bankruptcy to fully reimburse their rejected dealerships for their inventories of vehicles and parts. GM and Chrysler have sent letters to hundreds of dealerships across the country announcing that their dealership contracts will not be renewed.

“When you close your dealerships, you're firing your sales force, because these dealers are not a liability. They're an asset,” Isakson said. “In some cases, these dealers were asked to make additional purchases of products in order to save these companies. It’s only right that we help ensure the promises to these dealerships are fulfilled and they are reimbursed for their inventories of vehicles and parts.”

Specifically, the Automobile Dealers Assistance Act of 2009 would require GM and Chrysler to use any funding received from the U.S. Treasury while in a Chapter 11 bankruptcy to fully reimburse all GM and Chrysler rejected dealerships for the cost of all parts and inventory in the dealership's possession on the date of the bankruptcy filing, treating them the same as if the dealers chose to terminate their existing franchise agreements or dealer agreements. In addition, GM and Chrysler would be required to reimburse the dealerships for all other obligations owed by GM or Chrysler under franchise agreements or dealer agreements.

The legislation specifies that a bankruptcy court cannot allow GM or Chrysler to obtain access to debtor-in-possession funding unless the credit agreement or agreements expressly provide for this treatment of the dealerships.

The legislation would also allow rejected dealerships a minimum of 180 days to shut down their businesses and sell off their inventories.
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