Chrysler's First day Motion Related to Dealers

Among Chrysler's First Day Motions is a motion to authorize Chrysler to honor or pay certain pre-petition obligations to its dealers. These obligations include Warranty Programs, Extended Service Programs, Sales Incentives (allowances, discounts, holdbacks, etc), Dealer Credits (overbillings, reconciliations, damaged parts, vehicle damage, etc.), and Dealer Support Programs and Promotional Allowances (joint advertising and marketing programs). Chrysler requested the authority to treat these as ordinary course payments and to continue to make them and reconcile them post- petition on the Parts Statement.

All is not good however. The motion seeks to give Chrysler sole discretion to continue or discontinue these programs and to pay its dealers or not. In other words, Chrysler could pull the plug at any time and pay some, but not all dealers.

On Sales Incentives, the motion states “The Debtors are working to balance the competing considerations of conserving estate resources against the need to provide financial support to those dealers critical to their network, and thus, to the going concern value of their assets, brands and businesses. Accordingly, the Debtors intend to exercise their discretion to honor and pay Sales Incentives carefully, taking into account such factors as a dealer’s financial need, credit risk and any objective market factors. The Debtors expect that they will pay no more than 75% of the total accrued but unpaid obligations for Sales Incentives as of the Petition Date.”

Chrysler has given notice that it only intends to honor dealer obligations to those dealers it intends to keep