THE BIZOP NEWS

Image by Getty Images via Daylife

Here is some odd news concerning the forthcoming Big 3 Bailout, and the dealer franchisees.

"That's why an "Oversight Board" isn't enough. What's needed, under the aegis of the board, is a federal restructuring trustee who can lead car companies through a bankruptcy-type process if they opt for federal loans -- which Ford, alone among the Detroit Three, says it might not have to do.

A restructuring trustee would have the power to set appropriate compensation for terminated dealer-franchise contracts, which would be invalidated with no value if an auto maker files for Chapter 11 bankruptcy.

And the trustee should help find a foreign buyer for Chrysler, which is that company's best hope now."

I don't understand these remarks. In bankruptcy, the franchisor can disclaim any lease or franchise contract. This despite the state termination laws covering the dealer-franchisees. Once the contracts are disclaimed the franchisee is then free to continue as an independent operator. There is no need for any special restructuring trustee.