The Chrysler National Dealer Council, which represents the dealers the bankrupt automotive company announced it would eliminate last week, has decided to take their fight public and filed a statement with the bankruptcy court earlier today, in which the NDC seeks to prevent Judge Gonzalez from cancelling their existing contracts, and in principle to afford them non-bankruptcy rights. Unfortunately, as the debtor is in bankruptcy, it is very difficult on what legal ground their argument has a chance of succeeding.

In its brief, the NDC makes the following claims:

  • Dealers produce revenue, not expense, for Chrysler
  • Dealers absorb inventory risks
  • Dealers invest in facilities and customer service
  • Maintaining the Network is essential to Chrysler's future

All fair points, however, it will be a stretch to see the contract claim argument overturned at this point, as Chrysler has made the point that cancellation of dealer contracts is critical to the future survival of the company, and oh so many taxpayer interests currently involved (mostly involuntarily).

The NDC conclusion is worth highlighting:

This case is enormously complex and important to the nation's economy. Moreover, the outcome of these matters will dramatically impact the lives of hundreds of thousands of people. Because of the unprecedented complexity of this proceeding, its tremendous importance, and the extremely short time periods in which the Court must consider the requests of Chrysler, it is essential that the Court have available to it all relevant information. For these reasons, the NDC urges the Court to consider the facts presented herein in assessing the Motions. The NDC also urges the Court, in ruling on Chrysler's rejection request, not to foreclose the right of any dealer whose contract Chrysler proposes to reject to argue that it is entitled to whatever protections may be afforded by applicable non-bankruptcy law. Any dealer whose contract is proposed to be rejected should have a full and fair opportunity to assert any rights it may have under applicable law.

The last sentence is critical, as this will bring about the potential for a divergence between federal, bankruptcy, and state law. This could all get very ugly, very quick as objection after objection by cut dealers arises (whether together or separate from the NDC), thereby significantly delaying the bankruptcy case.

Zero Hedge will monitor this development and will advise readers of when the scheduled hearing date on the matter will be.

Full filing below:

Chrysler Dealers Filing