There were approximately 479 objections filed by the June 15, 2009 deadline by suppliers and other trade creditors to GM’s proposed cure costs (click link to see list). An additional 75 objections were filed after the deadline and on or before June 20, 2009. As in the case of Chrysler, the majority of the objections were to cure cost amounts. However, as noted in our prior post, the cure cost procedures also provided a frequent basis for objection. As a final irony, Chrysler’s objection was among the most vehement (as well as apparently a day late). In the following post, we discuss the substantive objections and provide a sampling of the differences between GM’s cure costs and cure costs computed by suppliers.
Articles tagged with: Cure Costs, Amounts
GM Bankruptcy – Cure Costs Procedures Catastrophic Failures
Automotive suppliers can only hope that GM will make better cars than they do cure cost procedures. Based on the cure cost objections (“Cure Cost Objections”) filed, the procedures approved by the Bankruptcy Court either were flawed from the beginning or improperly executed. The net result is to cast a shadow on the entire contract assignment and assumption process pursuant to the proposed 363 sale to New GM. In the following post we discuss the problems experienced by suppliers. In a later post, we summarize the substantive objections that were filed and give a sampling of the differences between the GM cure costs and the Supplier cure amounts.
GM Bankruptcy – For Suppliers Chrysler Bankruptcy Lesson 1
(Update: Since the original post date we have added two additional posts on the GM Cure Cost Procedure and the Supplier Objections that were filed to GM Cure Costs. Please Click the preceding link to see those posts.)
The Chrysler bankruptcy taught suppliers several lessons. Lesson 1 – SUPPLIERS, BE READY TO CONFIRM THE CURE AMOUNT FOR THE ASSIGNMENT OF GM SUPPLY CONTRACTS. Consider the years that your company has worked with GM. If your company got a cure cost notice from GM today, would it be ready to say “If GM pays my company this amount, my company has no further claims against GM, and if it does have additional claims, we give them up?” A lot of suppliers in the Chrysler bankruptcy found out the hard way that they were not ready to respond; the pain just has not hit yet.
Chrysler LLC Bankruptcy – Supplier $1,000,000 Cure Cost Club
Chrysler LLC has filed 4 (the original and 1 amendment and 2 supplemental) lists of Assumed Designated Supplier Contracts and Cure Costs. Undoubtedly, there are changes that will be made. The lists to date have already undergone substantial objection and in many instances Chrysler and the Supplier are on different planets in terms of Cure Cost amounts.
For any Tier 2 Supplier, however, it is still important to determine if its Tier 1 customer is on the list. There is at least one big surprise omission from the assumed contract list.
Chrysler LLC Bankruptcy – Supplier Contract Cure Costs Horrors
A scanning of the “Cure Costs” objections shows a brewing mess that might hamper (depending on how the various objections are handled by the judge) the planned speedy sale to new Chrysler. Whether the extent of the problems raises a red flag for Fiat has yet to be seen. For any Merger and Acquisition lawyer these problems certainly would yield sleepless nights.
The Primary Objection – Cure Cost Amounts
The objection common to the vast majority of filings is that the cure amount is incorrect. This was to be expected. What was not expected and what is somewhat alarming is the magnitude of several of the alleged Chrysler understatements of Cure Costs.