By Mark Huffman
ConsumerAffairs.com
June 24, 2009
West Virginia and Ohio have taken action in hopes of blocking the bankruptcy sale of General Motors.
West Virginia Attorney General Darrell McGraw has filed an objection with the United States Bankruptcy Court in New York against General Motors proposed sale of nearly all its assets and termination of GM dealers in West Virginia.
McGraw took a similar step earlier this month in an unsuccessful attempt to block the closing of Chrysler dealerships in his state, as part of that companys bankruptcy proceeding.
General Motors asked the bankruptcy court earlier this month for permission to sell the company to a "New GM" and terminate dealers across the country. If the request to terminate is accepted by the bankruptcy court, affected dealerships in West Virginia will be required to shut down by October 2010.
In his objections, McGraw asked the bankruptcy court to prevent the sale of GMs assets without going through the Chapter 11 process. The laws governing Chapter 11 reorganization provides substantial rights to creditors, including dealers whose franchises are in jeopardy, he said.
McGraw said West Virginia consumers also will suffer because they will have to drive further to service their vehicles under the manufacturers warranty. The filing also objects to procedures for termination proposed by GM, which McGraw says are in violation of West Virginia law that protects new car dealers from being arbitrarily terminated.
"Termination of the GM dealerships in West Virginia will cause untold harm to dealers and consumers alike," McGraw said. "Dealers are GMs primary customers. It simply does not make sense to terminate your customers when you are trying to sell more cars."
The bankruptcy court is scheduled to hear GMs request and multiple objections on June 30 in New York. If approved, dealers could be cut off from acquiring new inventory as early as December 2009.
Ohio Attorney General Richard Cordray announced that his office has filed four objections to the pending GM sale, also acting on behalf of the State of Ohio and Ohio consumers and dealerships.
"While we hope that in the end GM will emerge stronger and more resilient," said Cordray. "We cannot let big business bankruptcies in federal court trample over state law. The objections filed today seek to preserve the integrity of a system designed to protect Ohioans."
The Attorney General's limited objections request that the Court enter an order denying the sale motion until there is clarification:
As to whether new GM will be assuming worker comp liabilities of old GM
Of preserving the Ohio Department of Taxation's right of setoff against any tax refunds owed by GM
Of entitled protection for dealerships under state dealer law
Of the assumption of lemon law claims, warranty claims; protection of consumer privacy issues; environmental liabilities
"There should be no tolerance for ambiguity when hundreds of thousands of jobs are at risk and states face losing millions of dollars," said Cordray. "We not only seek clarification but fair and just arrangements on behalf of the State of Ohio and its consumers and dealers."
Additionally, Cordray signed on to the multi-state objection spearheaded by the National Association of Attorneys General and signed on by more than 35 state Attorneys General further addressing these areas and urging the Bankruptcy Court to preserve states' rights.
