American Suzuki Motor Corp. was granted interim court approval to borrow up to $45 million as it closes its auto dealerships and revives motorcycle and boat sales with the aid of bankruptcy protection. Suzuki Motor Corp. will offer cash payments in 10 days in order to avoid extended court battles with its 216 dealerships if they voluntarily throw out their franchise deals.
In court, Suzuki lawyer Richard Pachulski said that a variety of state laws typically protect dealers when auto manufacturers attempt to compel them to shut down.
Company attorney James Stang said that on Nov. 5, Suzuki placed the distributor into bankruptcy to cut U.S. losses, steer clear of the costs of making federal regulations more stringent and eliminate a sales network in which 69% of dealers sell lower than five cars each month.
In court papers, American Suzuki said that it will reorganize its motorcycle, boat and all-terrain vehicle business and to continue to sell via separate dealerships.
U.S. Bankruptcy Judge Scott C. Clarkson gave American Suzuki interim authority so that it can borrow money. In the upcoming weeks, American Suzuki will go back to court to get final approval to borrow up to $100 million.
Clarkson refused to ink any order that would involve making an effort to convince its auto dealerships to cancel their franchises. Clarkson also said that Suzuki doesn't require the court’s permission to sign these deals if it means that the dealers can go along.
Court documents show that if dealerships say yes to terminating their contracts by Nov. 30, Suzuki Motor will pay them half of what the distributor owes them within 10 days.