With American Suzuki having filed for Chapter 11 bankruptcy protection last week and choosing to cease selling automobiles in the U.S. many dealers are struggling to figure out the best plan of action.
Suzuki has said that it plans to reject franchise agreements of 220 dealers, asking them to surrender them voluntarily in exchange for cash payments and new agreements for Suzuki parts and service operations.
However, many dealers are wondering if these settlements would match those if Suzuki had simply chosen to cancel its franchise agreements. Under state laws, had the automaker simply axed its agreements with its dealer network, it would have been required to buy back existing inventory and parts as well as provide compensation to dealers for facilities and other incurred costs.
A spokesman for the National Automobile Dealers’ Association recently said that the organization is encouraging Suzuki dealers to consult with their legal teams in an effort to ensure they receive what they are entitled to in terms of a settlement, based on existing franchise laws.
Suzuki has said that its voluntary dealer settlement plan is designed to “maximize the assets available to Automotive Dealers and to promote public safety by the preservation of a network of service and parts dealers.”
However, dealers who agree to the settlement also waive the right to file an other claims against Suzuki, plus by entering Chapter 11, the automaker has essentially halted any pending lawsuits against it, including one from a former dealer who claims Suzuki ordered dealers to report false sales numbers in an effort to enable corporate management to collect bonuses.
As a result, because Suzuki has chosen not to terminate its franchise agreements and the fact that the “voluntary settlement” deal waives the rights on other claims, NADA is concerned that the whole bankruptcy process could be a way in which Suzuki is simply attempting to avoid its outstanding obligations to its dealers.
Leonard Bellavia, an attorney with the firm Bellavia Gentile and Associates, who also represents former Saab dealers following that automaker’s bankruptcy has said that Suzuki’s “voluntary” agreements are likely less than what would have resulted if the automaker had simply terminated franchise arrangements. He says he is planning to organize and represent affected Suzuki dealers in the hope they can recoup a significant amount in terms of damages. “That is not to suggest we expect that we’re going to collect 100 per cent of what the damages are to the dealers, but at a minimum, we’d like the inventories to be addressed,” he said.
