OK, it's one thing that Chrysler LLC filed for bankruptcy in Manhattan and that odds are General Motors Corp. (NYSE:GM) will, too. But why did two Michigan auto parts makers, Metaldyne Corp. and Visteon Corp., on Thursday file for Chapter 11 in Manhattan and Wilmington, Del., respectively, and not Detroit?
The Manhattan and Wilmington courts are getting choked with cases, yet Plymouth, Mich.-based Metaldyne and Van Buren Township, Mich.-based Visteon still decided to file there. As if Detroit didn't have an image problem before, it now has companies in its domain fleeing elsewhere to solve their problems.
Detroit judges certainly have every incentive to campaign for their venue, given that a GM bankruptcy, which would be more complex than those of both Chrysler and Lehman Brothers Holdings Inc., could provide Detroit's ailing economy with opportunities to build revenues brought in from hotel bookings, restaurant dining and office rentals.
A Detroit filing could also better suit GM because of the court's close proximity to GM's suppliers and the United Auto Workers' headquarters, Deborah L. Thorne of Barnes & Thornburg LLP previously told The Deal. A Chapter 11 filing in the Motor City could also make it easier for GM to break its labor agreements in comparison to Wilmington, said David Stratton of Pepper Hamilton LLP.
Problem is, Detroit needs that one breakthrough Chapter 11 filing to convince the national bankruptcy bar that it can handle a megabankruptcy. The groundwork could've been laid by huge auto parts makers Delphi Corp., Tower Automotive LLC or Dana Corp., but they all opted for the U.S. Bankruptcy Court for the Southern District in Manhattan, too. And the one gigantic auto parts manufacturer that did buck convention and filed for bankruptcy in 2005, $3.2 billion-in-assets Collins & Aikman Corp.?
It liquidated two years later. Not exactly a ringing endorsement. - Carolyn Okomo
See earlier story from Dealscape
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