Authorizes GM to Pay Pre-Petition Claims of Essential Suppliers,
along with Continued Assistance for Suppliers from U.S. Treasury
June 29, 2009
On Friday, the U.S. Bankruptcy Court for the Southern District
of New York issued an order authorizing General Motors (GM) to pay
pre-petition claims of "certain essential suppliers, vendors
and service providers." In addition, the court authorized the
continuation of the troubled supplier assistance program and continued
participation in the U.S. Treasury Auto Supplier Support Program
for the auto manufacturer, which filed for bankruptcy on June 1.
It is also ordered that "the debtors are authorized, but not
directed, in the reasonable exercise of their business judgment,
to pay all, or a portion, of the Essential Vendor Claims upon such
terms and in the manner provided in this order," reads the
order issued on June 25. Likewise, GM is authorized to enter into
trade agreements with essential vendors "as a condition to
payment of their Essential Vendor Claims."
The court notes that the company should determine essential vendors
by considering which suppliers are limited source suppliers "without
whom [they] could not continue to operate without interruption;
which suppliers "would be prohibitively expensive to replace;"
which suppliers present "an unacceptable risk should they cease
the provision of truly essential services or supplies;" and
"which groups of suppliers are susceptible to liquidity constraints."
GM will be required to maintain a report of its Essential Vendors
and the amount paid to them and supply it every two weeks until
the 363 Transaction (the process by which GM will sell its assets
to the New GM) closes to the Official Committee of Unsecured Creditors.
The order goes on to authorize GM to continue to provide Troubled
Supplier Assistance and to make all payments and extend all accommodations
"to any suppliers that may become financially or operationally
The Auto Supplier Support Program was created in March to provide
up to $5 billion in financing to auto suppliers.
In GM's initial motion requesting this action, filed early in the
proceedings, the company notes, "Support for the Essential
Vendors is further justified because many of these companies will
not be able to sustain their own operations unless their outstanding
pre-petition obligations are paid. The failure of these Essential
Vendors would result in the Debtors losing the ability to obtain
parts and supplies in a manner necessary to operate their facilities
or to effectuate the proposed 363 Transaction in an orderly and
GM has not released a list of suppliers. So far, many glass industry
suppliers have remained mum on the state of the automotive industry
with the recent bankruptcy filings of both Chrysler, which has already
emerged from the process, and GM.
Phil Jentoft, commercial manager-aftermarket, for Dow Automotive,
is one industry representative that has commented on the topic,
and he says the company is monitoring the situation as it plays
"At Dow Automotive we fully understand the challenges facing
the global automotive industry, and we trust that the actions being
taken now will be successful," Jentoft told glsasBYTEs.com/AGRR
magazine. "We have been monitoring the situation and planning
for contingencies. While the reduced vehicle build volumes have
impacted Dow Automotive's sales, we continue to be committed to
the future of the automobile industry, both in North America and
around the world."
for full text of Friday's order.
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