Chrysler's Rejection Motion Granted

Closing arguments took place today in connection with Chrysler's motion to reject 789 dealer agreements. Later this afternoon the Bankruptcy Court granted the rejection motion, effective immediately. Although Chrysler accomplished a major milestone, the order ultimately entered by the Bankruptcy Court was significantly watered down compared to the order originally proposed by Chrysler. The final Order may be found here. A blackline comparison showing changes between Chrysler's originally submitted order and its final submitted order may be found here at Annex 2.

Of particular note, Chrysler agreed to reject all site control agreements related to rejected franchise agreements. Site control agreements take many forms; however, a typical site control agreement took the form of an option agreement. In a typical option arrangement, in exchange for Chrysler's participation in costs to upgrade a facility, the dealer would grant Chrysler an option to purchase or lease the dealership facilty for a below market price in the event the dealer terminated operations. Other forms of site control might involve a lease-and-lease-back arrangement. Through such site control agreements, Chrysler could effectively control the facility and property at which a rejected dealership operated.

It its original filings, Chrysler sought to maintain in place for itself such site control agreements, notwithstanding the fact that it was Chrysler itself that was causing the dealer to cease dealership operations by rejecting such dealer's franchise agreements. Apparently realizing it sought to conquer a 'bridge too far,' Chrysler ultimately agreed that if it rejected a franchise agreement, it would also reject any site control agreement related thereto.