Saab US Dealers Ask For SCNA Chapter 11 Protection

Take this as a good sign, today 41 US dealers asked a judge for Chapter 11 protection which would allow them greater involvement in a liquidation and to preserve whatever structure they can in case a bid for the entire company is accepted. Automotive News published an article today explaining the situation with quotes from the dealer group’s attorney Leonard Bellavia. He is representing 162 of the 188 US dealers in the bankruptcy proceedings.

“We filed a [Chapter] 11 just in case a white knight comes out of nowhere and buys Saab’s parent,” he told Rick Kranz of Automotive News. In the US, a Chapter 11 differs from a Chapter 7 in a few key areas. He explains it in his statement on behalf of the dealers today.

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.

You’ll remember that McTevia & Associates is handling Saab Cars North America’s operations right now, and as such have control of the liquidation were they to file for bankruptcy. This was the dealers’ attempt to get a seat at the table to ensure that their and Saab’s best interests are preserved, and I hope that the judge in Delaware grants their request.

It’s no secret that this process is beyond frustrating for all involved, but I’d say for none more than the dealers. Everyone with a stake at Saab from the factory workers to engineers have gone through huge loss, but the dealers were left holding the most financial loss from the bankruptcy. I hope that for all involved a solid sale to an interested party who wishes to run Saab in the same way that Tata runs Jaguar Land Rover can be achieved within the next few days and weeks. Until then, we’ll sit and wait on the sidelines for other signs of positive things to come.

18 thoughts on “Saab US Dealers Ask For SCNA Chapter 11 Protection”

  1. This is helpful, since another news report states that 40 dealers were pushing for Chapter 7 bankruptcy to recover losses due to unpaid reimbursements from SCNA. While I realize that customers are much smaller creditors in terms of warranty and free maintenance losses, I would to see some consideration of us as well in the bakruptcy/liquidation process. There are fewer than 12,000 2010 and 2011 vehicles sold prior to the bankruptcy. It would be good if they could find a way to use liquidation proceeds to reinstate these agreements–either by paying GM to do them or setting up a fund to handle claims. I don’t think vehicles sold post-bankruptcy at low prices need to be included in that, since those buyers knew where things stood and purchased their cars ‘as is.’

    • As the owner of a Spyker era 2010 9-3, I am all for those warranty agreements being reinstated! I got a great deal on my Saab; I have owned Volvos and a MINI, and this Saab is perhaps the best car I have ever purchased. Aside from a faulty gas cap replaced by the dealer in the first week of ownership, I have had 0 problems with the car in 21k miles – better than I can say for the MINI.

      The news coming out of Sweden sounds good – 5 bidders (at least) who want to get their hands on the new tech. that Saab was working on. If the administrators can get the whole company bundled with the new tech, we should be in good shape.

  2. Are they, perhaps, also considering a class action against GM? By nixing the Youngman deal, GM caused enormous damage to many, if not all US Saab dealerships, and certainly to the stand-alone ones. Last time around, the threat of court action by dealers may well have been what convinced GM to sell Saab to Spyker.


    • Ivo,

      I am sure many on here would simply like the US dealers to start some sort of class action against GN, nut that will come down to what the agreement between Spyker & GM actually say’.

      From the most factual comments on here, it has been stated that agreement stated ‘No more than 20% of Saab could be sold to a Chinese owner’, if that is so [without any other clause] a class action could well have some merit.

      Unfortunately these actions are notoriously expensive to take, so it will then come down to the time, cost & if the overall potential gain [by winning, such an action] is high enough to take the gamble, something if the above clause is correct GM could well be counting on.

  3. Chapter 11 is protection against debts. The dealers have a fight behind them – which last for some years. What they need is real business again. We’ll see some more dealers gone by – sad but true.

  4. Very confusing. Perhaps the headlines (title) should have been “US Saab dealers ask for Chapter 11 protection for Saab Cars North America”? The dealers, themselves, are not in bankruptcy.

    • The referenced story’s opening paragraph makes it clearer as follows…

      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.

      This allows the dealers greater involvement as mentioned in Jeff’s story.

      • This is what is known as involuntary bankruptcy. Creditors (the dealers in this case) who are owed money can force their debtor(s) into bankruptcy. Most bankruptcies work the other way around — a debtor files for bankruptcy to get protection from the creditors.

        Involuntary bankruptcies by creditors against debtors help ensure that the creditors rights are protected and there is an orderly payment to creditors based on the status of lien rights. The creditors with the best lien rights are entitled to be paid off first and those with the worst lien rights or none at all get paid off last.

  5. Seems to me that the dealers are trying to buy time and fend off the two finance co’s – Ally (GM) and Catapiller. By doing a chapter 11, they can hold them at arms length, for a while anyway, and try to get their own claims either paid, or somewhat paid, or dump their remaining stock before the floorpan co grabbed it.. Most of the dealers claims are probably rebates – $8000 per sold car, that SCNA did not pay them.

    if SCNA gets forced into “involuntary chapter 11” by external creditors, but wishes to go chapter 7 itself, then I’d have thought 7, trumps 11.

    Weird situation. And a mess.

    • I would think that SCNA could go Chapter 7 and trump a Chapter 11 as well, but either way, creditors would be protected in an orderly fashion. But I guess since Chapter 11 is a reorganization, it doesn’t hurt to go that route first in case Saab comes up with a savior.

  6. Let’s hope the dealers have a case to rake GM Over the coals. The detriment GM has caused to businesses all over the world is astounding and they simply should not get away with it.

    • It seems to me that attempts to sell Saab were in violation of GM’s agreements with Spyker/Swan. If GM did not breach its contracts, I don’t think it would have any liability, no matter how many people got hurt.

      I am now without a warranty on a 2011 9-5, but I don’t think I, or anyone else, would have much of a claim against GM unless GM was absolutely obligated to permit the sale of Saab under these circumstances. And I mean absolutely.

      And I am sure, GM anticipated there might be an attempted sale of Saab before GM got paid off and made some pretty solid restrictions on sale that will stand up in court. I would be very surprised if they left any loophole that could open GM up to liability in these circumstances.

  7. a “white knight out of nowhere”? Like obscure and remote regions of this planet, where only one third of all humans happen to live? Doesn’t this guy read Saabsunited?

  8. I think without doubt, these dealers are trying to estblish tort before the court so their fasnchise realtionships, and agreements, with the old Saab company are moved up the food chain by the courts in figuring out what is owed to whom. The franchisee laws here, are very much in favor of the dealer. It turns completely on how they were written between Swan and the NA dealers. But unless they are air tight for Swan, the dealers will have a big say. I think any judge will rule that these dealers, could be compensated for their lost, by being granted from the new franchiseor, a new dealership by the new owner, as a way to settle and claims between the two sides.
    Just my hopes in order to get things rolling again ASAP.

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