Wednesday, November 19, 2008

General Motors may need to file for protection from creditors under Chapter 11 of the United States Bankruptcy Code. The question for its employees, suppliers, franchisees, customers and other stake holders is whether an automaker can successfully reorganize under Chapter 11.

Some argue that consumers will not purchase an automobile from a company in Chapter 11 for fear that there will not be a company to stand behind the warranty. And there can be no doubt, that most consumers will not purchase an automobile without a warranty that they believe will be honored. But ?The idea that the filing of a Chapter 11 by GM will destroy consumer confidence underestimates both consumers and GM?s management.? said Myles Alderman, a nationally recognized business bankruptcy lawyer and author of Chapter 11 Business Reorganizations: For Business Leaders, Accountants and Lawyers. ?The consumers already know that GM is in dire shape and may not survive without some appropriate action. The filing will not make that situation worse. To the contrary, a Chapter 11 would improve the financial health of GM and increase its ability to honor warranties on new cars sold.?

Obligations incurred after a company files Chapter 11 (such as the warranty on cars sold after the filing date) would not be discharged by the bankruptcy. In many Chapter 11 cases, that knowledge alone is enough to promote new sales.

Chapter 11 reorganizations of manufactures of warranty dependent products are not simple. However, Myles Alderman concludes that ?A skilled management team committed to delivering the vehicles consumers need advised by talented insolvency professionals can successfully steer GM through the Chapter 11 process to emerge as a stronger more profitable business to continue to design, build and service cars and trucks for decades to come.?

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Myles H. Alderman, Jr., Esq., is the author of Chapter 11 Business Reorganizations: For Business Leaders, Accountants and Lawyers (Outskirts Press, 2006) ? One of the best-selling books on business bankruptcy. He also is the author of Bankruptcy Law Chapter of the Connecticut Lawyers Desktop (CBA, 2008). Some prior cases of interest: USRepeating Arms (Winchester Rifles); MK Laboratories; TWA, and Dairymart.

Attorney Myles Alderman has been representing debtors, creditors and other parties in interest in Chapter 11 Business Reorganizations since 1986. His clients include, manufacturers, distributors, retailers and financial institutions ranging in size from closely held businesses to some the largest corporations in the world. In 2006, Alderman was designated one of the top lawyers in the area of Business Bankruptcy Law by the Law and Politics Magazine.

Alderman is a member of the Business Bankruptcy Section of the American Bar Association, The Business Bankruptcy Section of the American Bankruptcy Institute, and The Executive Committee of the Commercial Law and Bankruptcy Section of the Connecticut Bar Association. He was educated at Kenyon College (A.B. Economics & Psychology), Cambridge University (Post-Grad. Economics), and Syracuse University College of Law (J.D. Cum Laude), where he earned the LFE Goldie Award for Outstanding Scholarship and was managing editor of the Syracuse Journal of International Law and Commerce.