So the sad fact has finally reared it’s ugly head. GM, the largest and most diverse company to file Chapter 11 bankruptcy protection, is looking for the best path through the mess they’ve been mired in. While Chapter 11 gives them the ability to operate, the company that will emerge will be vastly different than the one that we know today. With talks of “Government Motors,” fire and brimstone, and a unsure future, GM is itching to see what lies on the other side of the long drawn out court battles.
They might get an answer to their questions a lot sooner than expected though. While everyone thinks they’ll file in Michigan, they’ve found a nice little loophole in the law that allows them to file somewhere else. By exploiting an option they plan to file in the land of quicker Chapter 11 solutions, a land where Enron, WorldCom, and General Growth Properties filed. To fully understand how they are able to file somewhere else in Michigan, one has to learn about a little dealership in Harlem, NY.
Chevrolet-Saturn of Harlem opened up back in 2006, and was supposed to help import money and jobs into a stagnant part of Harlem that had not hosted a car dealership in over 40 years. Rick Wagoner, Mayor Bloomberg, Representative Charles Rangel, and the Reverend Jesse Jackson we’re all there on opening day to praise open the dealership. The mostly minority owned business took a successful business model, but their high expectations in the face of their location caused the dealership to under perform. GM, wanting to help out the little guy, took control of the business, and it is one of very few dealerships that is GM owned and controlled. GM had been actively looking for another owner for it, but then a juicy opportunity came up.
Oddly enough, Chevrolet-Saturn of Harlem filed for Chapter 11 before GM did. Turns out they had a debt issue as well, and are looking for a way out. Best part of all though, since they are a GM owned dealership, this allows GM to claim they are incorporated in New York, and file Chapter 11 in Manhattan courts.
Clever GM lawyers knew that the court system in New York has handled large cases in the past, thus are better equipped to deal with the demands of all the court time this will take. Filing in New York can get GM restructured sooner, and make arrangements with their debt holders quicker, hopefully producing the leaner meaner GM we are all looking forward to. Being able to file in a state familiar with large Chapter 11 filings seems to be the smartest thing GM has done in years.
What about the scape-goat? Chevrolet-Saturn of Harlem appears to be conducting business as usual, as Chapter 11 allows them to operate as usual through the process. Who knows, maybe iconic GM will rise up to be the world beater they once were, and we’ll have a small, neglected dealership to thank for speeding their success along.
-KF
