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Dealers: Take Suzuki deal or fight?

Dealers: Take Suzuki deal or fight?

suzuki-emblem-628-1352395975LOS ANGELES — Suzuki dealers face a decision: Give up their franchises in exchange for cash or fight the factory in bankruptcy court.

American Suzuki Motor Corp. filed for Chapter 11 bankruptcy on Monday, Nov. 5, to wind down its U.S. automotive division. It seeks to reject the franchise agreements of its 220 U.S. auto dealers.

American Suzuki is asking dealers to surrender their franchise agreements voluntarily in exchange for a cash settlement and new contracts to run Suzuki parts and service outlets.

The question for dealers: Are the offers comparable to what they would have received under state franchise laws?

Had Suzuki simply canceled the franchises, outside bankruptcy court, state franchise laws would have compelled the automaker to buy back new-vehicle inventory and parts and to compensate dealers for facilities and other costs.

A National Automobile Dealers Association official last week said Suzuki dealers should receive what they would be entitled to under franchise laws and advised them to consult attorneys. Dealers were receiving the offers late last week and were bound by confidentiality agreements.

Suzuki dealers can choose not to sign the settlement offers and file a claim in the bankruptcy case for what they believe they are owed. But such a move means a dealer’s claim could be worth just pennies on the dollar by the time Suzuki pays off other, higher-priority creditors.

If dealers accept Suzuki’s offer, they are guaranteed to collect the full settlement amount, calculated by measuring dealership sales, rent, vehicles in inventory, facilities investment and other metrics.

Freddie Reiss, Suzuki’s chief restructuring officer and a senior managing director at FTI Consulting Inc., in court documents said the dealer settlement plan is intended “to maximize the assets available to Automotive Dealers and to promote public safety by the preservation of a network of service and parts dealers.” Suzuki has pledged to honor consumer warranties.