Dealers want Saab North America placed into Chapter 11 bankruptcy
DETROIT -- A group of 41 Saab U.S. dealers today asked a U.S. Bankruptcy Court to place Saab Cars North America into Chapter 11 bankruptcy protection.
The lawyer representing Saab's U.S. dealers submitted the involuntary Chapter 11 petition in U.S. Bankruptcy Court in Wilmington, Del.
"We filed a [Chapter] 11 just in case a white knight comes out of nowhere and buys Saab's parent" and would want to reorganize the North American operations, said Leonard Bellavia, the lawyer representing 162 of Saab's 188 U.S. dealers.
The dealers last Friday had threatened to file a Chaper 7 for involuntary liquidation.
Today's petition listed individual dealer claims for unpaid warranty, incentive reimbursement and other obligations ranging from $79.11 to $167,977.98.
Parent company Saab Automobile AB filed for liquidation on Dec. 19 in a Swedish bankruptcy court.
Saab Cars North America suspended operations on that day and selected McTevia & Associates to manage the company's U.S. operations, giving it day-to-day control of the assets.
Kurt Schirm, president of the Saab Dealer Council, said dealers studied the liquidation plan set up for Saab Car North America by McTevia & Associates.
But the dealers decided an involuntary Chapter 11 bankruptcy was in their best interests.
Schirm said the bankruptcy attorney who filed the petition today, "seldom sees these third-party administration situations work out because they just don't have enforceability ... the enforceability that a court would. There is no one dictating or mandating the decision, it is all one open-ended negotiation.
"You could also wind up in a situation where you have multiple lawsuits filed in different courts for different reasons in different jurisdictions as opposed to having a single venue," he said.
Bellavia said the bankruptcy petition was filed in Delaware for two reasons.
"We just feel that a court further away from Detroit will be more dealer friendly," Bellavia said in a telephone interview.
He added that dealers were concerned Saab would file for bankruptcy today.
"The dealers were left with no alternative but to file and we felt they might be racing us to the courthouse so that they could get the case filed in Michigan," Bellavia said.
Second, several members of the Saab dealer council, as is the law firm representing the dealers, are located on the East Coast, "so it was a matter of convenience," he said.
Tim Colbeck, COO of Saab Cars North America, said he was not surprised by the dealers’ petition.
"Maybe the timing (of the petition) did," Colbeck said. "Overall, within the scope of what we have been doing, we anticipated that it was something that could happen."
STATEMENT FROM DEALER COUNSEL LEONARD BELLAVIA
The Chapter 11 allows Saab an opportunity to liquidate its assets, with direct supervision of the court and the dealers
In a Chapter 7, a trustee is appointed and the costs of liquidation become greater because the trustee is paid commissions, and has to hire new counsel that does not have the knowledge of Saab's current counsel, an additional substantial cost to creditors.
Because of this, we believe that since the assets are liquidating under either Chapter 11 or Chapter 7, allowing Saab to liquidate, with dealer supervision, is the most effective way of minimizing the costs of liquidating the assets.