May 11, 2009

Aaron Jacoby quoted in Los Angeles Times dealership reduction article

2 min

A May 7, 2009 article in the Los Angeles Times reported that auto giants Chrysler and GM will ask as many as 2,000 dealerships to close their doors in the next seven days. Last week, GM posted a six billion dollar quarterly loss and Chrysler filed for bankruptcy protection in a New York court - the automakers say cuts are needed to reduce costs and return to viability.

In the meantime, the National Automobile Dealers Association has started a legal fund for dealerships, retained counsel and is mounting an advertising campaign urging President Obama to "choose Main Street over Wall Street." The dealers employ hundreds of thousands of people nationwide and pump billions of dollars into their area economies.
According to the article, the dealers will not be offered a cash settlement for their franchises - buying out franchises cost GM more than one billion dollars when it wound down the Oldsmobile brand earlier this decade, and GM - which burned through $10.2 billion in cash in the first quarter of 2009 - doesn't have enough money to absorb such an expense.

Aaron Jacoby, a partner in Venable's Los Angeles office, said a no-cash offer didn't cut it. "Dealers are going to fight it until the bitter end," Jacoby said.

According to the article, dealers across the country are also attending seminars on how to prepare for termination and the implications of bankruptcy, while hundreds, if not thousands, are hiring lawyers to protect them individually.