One month after filing Chapter 11 bankruptcy, American Suzuki is granted up to $100 million in debtor-in-possession financing to enable it to close its U.S. car business.
The auto maker says the funds will help ensure it has the cash necessary to operate its business during the pendency of the Chapter 11 case.
The decision to halt new-car sales only covers the continental U.S., not Canada or Mexico. Suzuki vehicle sales in Hawaii and Puerto Rico are exempt.
A bankruptcy court approved the loan with the stipulation $50 million would be earmarked for operations while the remaining $50 million would be applied toward the purchase of inventory from the parent company in Japan to meet continuing demand.
"American Suzuki Motor Corp. is continuing to market and sell its remaining U.S. automobile inventory through its national network of automotive dealers," the auto maker says in a statement. "ASMC continues to provide marketing and incentives to help promote the continued sale of the automobiles remaining in dealer inventory and the pipeline."
New-car orders exceeded American Suzuki’s remaining stock in November, when sales rose 22% from year-ago. As a result, the subsidiary plans to purchase 2,500 more vehicles from Japan that were built after the bankruptcy was announced.
“Consistent with our long history of standing by our products, Suzuki automobile owners will be protected,” American Suzuki Chairman Takashi Iwatsuki said in a letter to customers at the time of the bankruptcy filing in November. "All warranties will continue to be fully honored, in accordance with their terms, and automobile parts and service will be provided to consumers through ASMC’s planned continuation of a service and parts dealer network."
American Suzuki last month received a $45 million loan from its Japanese parent to make re-payment deals with franchise dealers while awaiting the court's decision on the larger loan. Court documents show the subsidiary has an estimated $233 million in assets and debt of about $346 million, mostly owed to Suzuki-owned companies.
American Suzuki says it has reached agreement with all of its top 50 dealers to become parts and service centers. The total number of acceptances represents more than 98% of the auto maker's total volume of sales in the continental U.S.
