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05-55927-R CORPORATION, et al., ) (Jointly Administered) ) Debtors. ) Honorable Steven W. Rhodes ____________________________________)_________________________________________ OBJECTION OF GENERAL ELECTRIC CAPITAL CORPORATION TO DEBTORS FOURTH MOTION FOR AN ORDER EXTENDING THE EXCLUSIVITY PERIODS TO FILE A CHAPTER 11 PLAN AND TO SOLICIT VOTES THEREON General Electric Capital Corporation (GECC), by and through its attorneys, hereby objects (this Objection) to the Debtors Fourth Motion for An Order Extending the Exclusivity Periods To File a Chapter 11 Plan And To Solicit Votes Thereon (the Motion)1. GECC objects to the Motion because the Debtors have failed to provide this Court and/or its creditors with sufficient information to support the extension of the exclusivity periods. In support hereof, GECC respectfully represents as follows: Background 1. On May 17, 2005 (the Petition Date), the Debtors commenced these cases by IN RE:

filing voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code. 2. Since that time, the Debtors have continued in possession of their property and

have operated and managed their businesses, as debtors in possession, pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Motion.

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This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and

1334. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2). 4. The Debtors are in the business of supplying parts to automotive manufacturers. Objection 5. Section 1121(d) of the Bankruptcy Code allows the Court to extend the Debtors

exclusive periods only if the Debtors can establish that cause exists for such extension. See 11 U.S.C. 1121(d); see also In re Express One Intl, 194 B.R. 98, 100 (Bankr. E.D. Tex. 1996) (holding that several factors have been defined by courts as being relevant in determining whether cause exists); In re All Seasons Indus., Inc., 121 B.R. 1002, 1005 (Bankr. N.D. Ind. 1990) (rejecting debtors exclusivity extension motion because evidence did not rise to the level of cause required by section 1121(d)); In re Gibson & Cushman Dredging Corp., 101 B.R. 405, 409-10 (Bankr. E.D.N.Y. 1989) (holding that courts should avoid creating an imbalance of bargaining power between debtors and creditors by granting exclusivity extensions without cause); In re McLean Indus., Inc., 87 B.R. 830, 834 (Bankr. S.D.N.Y. 1987) (holding that exclusivity extensions are not to be granted in a cavalier manner); In re Pine Run Trust, Inc., 67 B.R. 432, 434 (Bankr. E.D. Pa. 1986) (holding that both the language and purpose of [section 1121(d)] require that an extension not be granted routinely). 6. Although cause is not defined in the statute, the legislative history makes clear

that section 1121(d) of the Bankruptcy Code was intended to favor creditors and to tip the historical balance away from debtors. Under the old Chapter XI, only the debtor could propose a plan throughout the entire course of the case. See 11 U.S.C. 723 (1970). In enacting a provision of the Bankruptcy Code that gave debtors a 120-day exclusive time period and

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thereafter terminated a debtors exclusive right except for cause, Congress made a clear change from historical precedent for the following reasons: The exclusive right [to propose a plan under chapter XI] gives the debtor undue bargaining leverage, because by delay he can force a settlement out of otherwise unwilling creditors . . . The debtor is in full control, often to the unfair disadvantage of creditors ... At the same time, the bill [proposed chapter 11] recognizes the legitimate interests of creditors, whose money is in the enterprise as much as the debtors, to have a say in the future of the company. The bill gives the debtor an exclusive right to propose a plan for 120 days. In most cases, 120 days will give the debtor adequate time to negotiate a settlement, without unduly delaying the creditors.

HR Report No. 95-595, at 231-32 (1978). 7. Courts have identified certain relevant factors in determining whether cause

exists to extend the exclusive periods. See In re Mayo Newhall Memorial Hospital, 282 B.R. 444, 447 (9th Cir. B.A.P. 2002); Express One, 194 B.R. at 100; McLean, 87 B.R. at 834. The court in Express One set forth the most comprehensive list of such factors, which include: a. b. c. d. e. f. g. the size and complexity of the bankruptcy case; the necessity of sufficient time to permit the debtor to negotiate a plan of reorganization and prepare adequate information; the existence of good faith progress toward reorganization; the fact that the debtor is paying its bills as they become due; whether the debtor has demonstrated reasonable prospects for filing a viable plan of reorganization; whether the debtor has made progress in negotiations with its creditors; the amount of time which has elapsed in the bankruptcy case;

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whether the debtor is seeking an extension of exclusivity in order to pressure creditors to submit to the debtors reorganization demands; and whether an unresolved contingency exists.


Express One, 194 B.R. at 100; see also In re Dow Corning Corp., 208 B.R. 661, 664 (Bankr. E.D. Mich. 1997). 8. The Debtors Motion focuses on three of the Express One factors: (a) the size and

complexity of the chapter 11 case; (b) the debtors progress in the chapter 11 case; and (c) whether an extension of the exclusivity periods will harm the debtors creditors. The Debtors Motion fails, however, to even satisfy their three cherry-picked factors because of the generality of the statements contained in the Motion regarding the Debtors progress with respect to developing a plan for their future viability. 9. The Debtors fourth request for an extension of exclusivity does not allege with

specificity reasonable prospects for filing a viable plan of reorganization. The Debtors have not provided this Court or their creditors with any concrete information with respect to the Debtors recent financial performance. In paragraphs 24-25 of the Motion the Debtors state that the Debtors progress inachieving the overall desired financial results has been slower than the Debtors anticipated. Nevertheless, the Debtors continue to be successful in maintaining a liquidity base sufficient to operate on an uninterrupted basis without the need for further extraordinary financial support. Such generalities do not support a fourth extension of exclusivity. The Debtors should be required to share with this Court and their constituencies their current financial performance, their projected liquidity and their specific prospects for and progress toward a successful reorganization.

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In paragraph 28 of the Motion the Debtors allege that they continue to make

progress in these cases, but there also remain significant issues to address. This generality is also legally insufficient. The Debtors should be required to specifically set forth where progress has been made and what issues remain and how and when they will be addressed. 11. Finally, one of the factors delineated by the Express One court was whether the

debtor has made progress in negotiations with its creditors. The Debtors make a general statement that they continue to communicate regularly with all of their major constituencies, however, such a statement does not indicate what progress has been made with the creditors. For example, on May 31, 2006 the Debtors filed a request for a temporary restraining order with respect to a facility that they operate as agents of GE Capital de Mexico, S. de R. L. de C.V. (GE Mexico) in Hermosillo, Mexicothe Debtors crown jewel. Then, on June 26, 2006 the Debtors unilaterally withdrew the motion stating that the Debtors were currently engaged in settlement discussions with GE Mexico. The Debtors Motion does not (and cannot) allege that progress has been made with respect to those settlement discussions. Conclusion For the foregoing reasons, GECC respectfully requests that the Court (i) deny the Motion and (ii) further and alternatively, grant such other relief as the Court deems just and proper. July 10, 2006 /s/ Erin L. Toomey__________________________ Judy A. ONeill (P32142) Erin L. Toomey (P67691) FOLEY & LARDNER LLP 500 Woodward Ave., Suite 2700 Detroit, Michigan 48226-3489 Telephone: (313) 234-7100 Facsimile: (313) 234-2800 5
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-andDavid S. Heller Josef S. Athanas LATHAM & WATKINS LLP 233 South Wacker Drive Sears Tower, Suite 5800 Chicago, Illinois 60606 Telephone: (312) 876-7700 Facsimile: (312) 993-9767


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