International Law

Odd News about the Franchised Car Dealers and Bailout

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Here is some odd news concerning the forthcoming Big 3 Bailout, and the dealer franchisees.

"That's why an "Oversight Board" isn't enough. What's needed, under the aegis of the board, is a federal restructuring trustee who can lead car companies through a bankruptcy-type process if they opt for federal loans -- which Ford, alone among the Detroit Three, says it might not have to do.

A restructuring trustee would have the power to set appropriate compensation for terminated dealer-franchise contracts, which would be invalidated with no value if an auto maker files for Chapter 11 bankruptcy.

And the trustee should help find a foreign buyer for Chrysler, which is that company's best hope now."

I don't understand these remarks. In bankruptcy, the franchisor can disclaim any lease or franchise contract. This despite the state termination laws covering the dealer-franchisees. Once the contracts are disclaimed the franchisee is then free to continue as an independent operator. There is no need for any special restructuring trustee.

Full post as published by Misleading Advertising Law on December 09, 2008 (boomark / email).