Okay. It appears that the Non-TARP lenders have been "convinced" to accept their losses and that the Administration's plan to rush Chrysler through Chapter 11 might actually succeed.
If I understood correctly, the "urgency" that justified a rushed 363(b) sale instead of a normal Chapter 11 process was that consumers wouldn't purchase cars made by a company in bankruptcy.
Imagine my surprise then upon reading this item from the Los Angeles Times. What particularly intrigued me was this part of the article:
My initial reaction was amazement. After all, Chrysler retained Jones Day in November and filed for bankruptcy at the end of April. They may have started planning for a possible bankruptcy prior to hiring Jones Day, but they've been considering the possibility for at least five months.
Chrysler said it is aware of the lemon law logjam, but won't say how many of its customers are affected. The company said it had no plans at this point to ask the bankruptcy judge to approve payments to settle lemon law complaints.
"This is a complex process and there are a lot of issues being discussed," Chrysler spokesman Mike Palese said. "This could be one of those issues that comes up in the course of the bankruptcy, but I can't say that we have any plans to present it at this time."
I thought to myself "despite the time for planning; despite their concern about how consumers would react to Chrysler's bankruptcy; NOBODY THOUGHT ABOUT HOW TO DEAL WITH CONSUMERS WHO WERE SOLD DEFECTIVE CARS!"
I wondered whether they actually planned to have these checks bounce? I wouldn't think so given their anxiety about being in Chapter 11. I expected that they would have done everything and anything to prevent consumers from being effected by the bankruptcy process.
Then I went to the docket and now I'm just confused.
Chrysler filed motions to run their cash management system and to provide for their customers (Docket numbers 28 and 27, respectively). Furthermore, Judge Gonzalez provided interim orders agreeing to the use of the cash
On May 1st, Judge Gonzalez signed an interim order "authorizing debtors to honor or pay certain prepetition obligations with respect to warranty and extended service programs, and for related relief" (Docket number 209) and an interim order "approving the debtors continued use of their cash management system, bank accounts and business forms; granting approval of investment and deposit guidelines; authorizing banks participating in the debtors cash management system to honor certain transfers and charge certain fees and other amounts; permitting continued intercompany transactions and recognizing administrative expense status to postpetition intercompany claims; and preserving and permitting the exercise of intercompany setoff rights" (Docket number 211).
On May 4th, Judge Gonzalez signed an interim order "authorizing debtors to use cash collateral, granting adequate protection to prepetition secured parties and scheduling a final hearing" (Docket number 280).
On May 5th, Judge Gonzalez signed an interim order "authorizing debtors and debtors in possession to honor or pay certain prepetition obligations to or for the benefit of their dealers and other customers, and for related relief" (Docket number 361).
In fact, the order related to the warranty programs (Docket number 209) states, in part:
If I understand those orders correctly, the lawyers did exactly what they should have to provide for these people. Perhaps I can understand those checks bouncing if they were submitted during the interim period between the filing of the bankruptcy and the issuance of the orders, but Judge Gonzalez was very quick in dealing with these issues.
IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED on an interim basis to the extent set forth herein.
2. Pursuant to sections 105(a) and 363(c) of the Bankruptcy Code, the Debtors are authorized, in their sole discretion, to continue their Warranty Programs and Extended Service Programs and to perform all obligations related thereto in the ordinary course of business and without further order of the Court, including pursuant to setoff against amounts owed by individual dealerships to the Debtors, in accordance with ordinary business practices, pursuant to section 553 of the Bankruptcy Code or otherwise.
3. The Debtors' banks and financial institutions (collectively, the "Banks") are authorized and directed, when requested by the Debtors in the Debtors' sole discretion, to receive, process, honor and pay all checks presented for payment of, and to honor all fund transfer requests made by the Debtors related to, Warranty Programs or Extended Service Programs, whether such checks were presented or fund transfer requests were submitted prior to, on or after the Petition Date, provided that funds are available in the Debtors' accounts to cover such checks and fund transfers. The Banks are authorized to rely on the Debtors' designation of any particular check or fund transfer as approved by this Interim Order.
4. Nothing in the Motion or this Interim Order, nor the Debtors' payment of claims pursuant to this Interim Order, shall be deemed or construed as: (a) an admission as to the amount, validity or priority of any claim against the Debtors; (b) a waiver of the Debtors' rights to dispute any claim on any grounds; (c) a promise to pay any claim; (d) an implication or admission that any particular claim would constitute a Customer Obligation; or (e) a request to assume any executory contract or unexpired lease, pursuant to section 365 of the Bankruptcy Code.
So, now my question is: aren't these checks authorized for payment, despite the bankruptcy? If they are, who spoke to the LA Times leading them to say that "Chrysler advises customers with pending lemon law complaints to file a proof of claim form with the Bankruptcy Court and join ranks of the auto-maker's unsecured creditors?"
Am I misinterpreting the meaning of those orders? Is California's lemon law outside the scope of these orders?
Did the reporter misunderstand what he was told?
Did Mr. Palese misspeak?
Given the situation, my guess is that the spokesman misspoke. There may have been a miscommunication internally, but I believe that the attorneys and the corporate officials involved in preparing the bankruptcy prepared for this specific contingency. Somehow this information didn't make it to the Mr. Palese.
Am I wrong? Sphere: Related Content