Automotive

Sonnenschein's Corporate Reorganization & Bankruptcy Practice Group, together with the firm's Corporate, Litigation, Labor & Employment, Environmental/Energy and other practice groups, works on a variety of matters across the nation and globally in connection with distressed situations and bankruptcies in the automotive industry.  Areas in which Sonnenschein has significant expertise include:

• Trade creditor remedies, including setoff, reclamation and vendor priority claims
• Pensions, ESOPs, executive compensation and benefits
• Labor relations, including rejection or modification of collective bargaining agreements, work stoppages, and WARN Act issues
• Assumption and rejection of executory contracts and leases, including real property leases and supplier agreements
• Post-petition financing and credit agreements
• Insurance
• Tort and other contingent or legacy liabilities, including environmental, product liability, and product warranty
• International operations, including global affiliates, foreign suppliers, foreign claimants and outsourcing
• Third-party liabilities and guarantors, including release and settlement

Representative Engagements

The following is a summary of certain of the matters in which we have been actively involved for the party or parties noted in the descriptive text and that are of a public nature.  There are also representations in non-public matters that are not discussed by name herein. 

Federal-Mogul, Inc. (Del.)
We represent the Official Committee of Unsecured Creditors of Federal-Mogul Corporation and its affiliates in their Chapter 11 cases.  Federal-Mogul is one of the largest auto parts and systems manufacturers and distributors in the world, with operations throughout the United States and Europe.  A total of 157 companies filed for Chapter 11 and 134 of those companies also commenced insolvency proceedings in the United Kingdom.  Significant asbestos liabilities asserted against several of the debtors, both in the US and the UK, contributed to these cross-border insolvency proceedings.  The Federal-Mogul debtors, however, also had a complex and substantial debt structure with more than $2 billion of bank debt and more than $2.4 billion of note debt.  Our expertise was called upon in restructuring the company's business operations and de leveraging its balance sheet.

Throughout these proceedings, we have successfully represented the Federal-Mogul Committee in negotiations with and actions against the debtors, the asbestos claimants, the pre-petition secured lenders and the UK administrators in the UK insolvency proceedings.  Among other things, we quickly and successfully negotiated a complex settlement with the Official Committee of Asbestos Claimants, which formed the basis for joint plans of reorganization for the debtors.  We also led negotiations in the restructuring of the $2 billion of pre-petition bank debt on terms favorable to the debtors and other creditor constituencies.  Additionally, we led the team of US lawyers in negotiating and documenting plans of reorganization for the debtors in the UK insolvency proceedings in London.

We successfully sought and won the termination of the debtors' exclusive period to file a plan of reorganization.  This permitted the Federal-Mogul creditors committee to propose its own plan of reorganization based on the settlements reached with the other creditor constituencies.  A disclosure statement has been approved and the creditors committee and other parties are now working towards confirmation of the joint plans of reorganization for the debtors.

Exide Technologies, Inc. (Del.)
We served as special litigation counsel to the Official Committee of Unsecured Creditors in Exide's Chapter 11 case.  Including its subsidiaries, Exide Technologies is the largest producer of lead acid industrial and automotive batteries in the world.  The creditors committee defeated Exide's proposed plan of reorganization at a contested plan confirmation hearing.  Among other concerns, the bankruptcy court found the plan included an unreasonably low settlement amount with respect to litigation brought by the creditors committee against the company's pre-petition lenders.  As a result of the court's denial of confirmation, a new settlement was reached that provided approximately $200 million to the unsecured creditors.  This new settlement amount was $190 million more than the unsecured creditors stood to collect under the prior proposed plan.

In addition, Sonnenschein obtained a ruling whereby the court became the first Delaware court to recognize the committee's deepening insolvency claim as a cognizable claim under Delaware law.  The court also made other groundbreaking rulings by sustaining the committee's claims for avoidable transfers, equitable subordination, and aiding and abetting breach of fiduciary duties.  These rulings expanded the ability of committees to prosecute claims against third parties.  

Delphi Corp. (S.D.N.Y.)
We represent several of Delphi's major trade creditors and suppliers.  Issues being addressed include reclamation, filing proofs of claim, negotiating claim purchase forms with claims traders, pre- versus post-petition treatment, setoff and recoupment, purchase orders, alleged long-term contracts, new business and other ongoing trade relationship issues.

Hayes Lemmerz International, Inc. (Del.) 
Hayes Lemmerz and its affiliated and subsidiary debtors are a leading supplier of wheels, wheel-end attachments, aluminum structural components and automotive brake components.  The debtors are the world's largest manufacturers of automotive wheels, with a presence in 17 countries. 

As special litigation counsel to the Official Committee of Unsecured Creditors of Hayes Lemmerz International, Inc. and its affiliated debtors, we assisted in the successful settlement of the creditors committee's avoidance claims against a syndicate of the debtors' pre-petition lenders.  While never filed, Sonnenschein's extensive twenty-six count complaint was the catalyst for obtaining a favorable settlement from the debtors' pre-petition lenders.  The complaint sought, inter alia, to avoid more than $1.76 billion in preferential transfers of security interests and guarantees made to the debtors' pre-petition lenders in the year prior to the debtors' bankruptcy filings.

Hyatt Clark Industries, Inc. (N.J.)
We represented the hourly employees of Hyatt Clark, a manufacturer of roller bearings for General Motors.  These employees became Hyatt Clark's equity holders when the company was spun off from GM and its stock put into an Employee Stock Ownership Plan.  In settlement of litigation spearheaded by Sonnenschein attorneys, GM agreed to contribute to the recovery of unsecured creditors and to the cleanup of the Hyatt Clark plant, so that it could be sold.

Key Plastics, LLC (E.D. Mich.)
We represented Key Plastics, a Michigan-based manufacturer and supplier of plastic automotive parts and component systems, through its successful reorganization under Chapter 11.  Our attorneys shepherded Key Plastics through a competitive auction process and orchestrated an infusion of capital from a large equity fund.

Specialized Equipment Suppliers
Automotive companies often source their specialized equipment or components from third-party manufacturers.  We help our clients to structure their supplier agreements to minimize the risk that equipment or components will be attached or encumbered by their suppliers' creditors.