Bankruptcy judge amends motion for GM to terminate dealer agreement with Reagor-Dykes Floydada

Reagor-Dykes fires bankruptcy attorneys
(Source: General Motors)
(Source: General Motors)

FLOYDADA, TX (KCBD) - General Motors LLC filed a motion on Thursday, August 10 to allow the company to terminate its franchise with Reagor-Dykes Floydada Chevrolet. The judge granted the motion. On Friday, August 24, an amended motion was granted "to Lift the Automatic Stay or Grant Adequate Protection, which seeks to lift the automatic stay to permit GM to terminate its Dealer Sales and Service Agreement (the "Dealer Agreement") with Reagor-Dykes Floydada, LP ("Debtor Floydada") and withhold certain funds potentially due by GM to Debtor Floydada for potential future offset (if allowed by further order of the Court). In the alternative, GM must be provided with adequate protection of its interests."

Because of the ongoing case with Ford Motor Credit and the Chapter 11 Bankruptcy case, General Motors asked the bankruptcy judge to allow it to terminate shipments of new vehicles to Reagor-Dykes Floydada, freeze accounts for the dealership and send a notice of termination to them.

In the court documents earlier in the month, General Motors (GM) is "concerned that given serious allegations that sales out of trust have occurred, and that Reagor-Dykes Floydada is unable to reconcile its obligations, GM requests that it be permitted to freeze payments of dealer hold back funds until there can be a full accounting between the parties. Moreover, as permitted by the Dealer Agreement and Texas law, GM has sent the notice of termination of franchise subject to the requirements of Tex. Occ. Code § 2301.453, and requests that it be permitted to proceed with the termination process."

GM reported Reagor-Dykes Floydada is in a breach of its agreement requirements.

"(Reagor-Dykes) Floydada, by breaching its agreements with GM has created cause to terminate their ability to operate the dealership in Floydada, Texas. GM asserts that it is imperative that GM be permitted to take action to protect its interest by:

  • Terminate shipments of new vehicles to Reagor-Dykes Floydada;
  • Freezing accounts of the Reagor-Dykes Floydada related to dealer hold backs and other accounts; and
  • Send a notice of termination to Reagor-Dykes Floydada providing notice of the termination of the dealership franchise, as provide in Tex. Occ. Code §  2301.453.

The amended motion adds:

  • GM is permitted to freeze payments of dealer hold back funds pending a full accounting between the parties;
  • GM is permitted to proceed with the state administrative agency to terminate the franchise; and
  • The court shall retain jurisdiction with respect to all matters related to the interpretation or implementation of this order.
GM does not believe that Debtor Floydada can continue as a viable GM-branded going concern given the major problems in this entity's balance sheet, and GM does not believe that its customer loyalty and reputation should be further jeopardized in a futile chapter 11 reorganization attempt.  Moreover, this reorganization attempt cannot be premised on the continuation of a GM dealership: neither the Dealership Agreement nor the rights or obligations related to the same is a property right of Debtor Floydada, and they cannot be assumed or assigned as part of an asset sale.

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