Small Automaker Files For Chapter 11 Bankruptcy Protection
Jan. 31, 1989
NEWARK, N.J. (AP) _ Yugo America Inc., the troubled importer of inexpensive Yugoslavian-made cars, its parent company and an affiliate filed for protection under federal bankruptcy laws Monday despite objections from dealers.
Sagging sales and the loss of dealerships were among the problems cited by Yugo in November when company president William Prior resigned. Yugo's sales dipped to 31,546 cars in 1988, 35 percent fewer than in 1987.
Yugo, its parent Global Motors Inc., and affiliate Proton America Inc. said more than 300 companies and individuals may hold claims against them.
The Chapter 11 filing, which seeks protection from creditors while Yugo attempts to reorganize its finances, came as little surprise to industry analysts.
''Global Motors has had some financial difficulties for a while now,'' said California auto analyst Chris Cedergren of J.D. Power and Associates. ''They put a great deal of money into Global Motors hoping they would turn it around. It was sagging.
''It really didn't help that much,'' he said.
U.S. Bankruptcy Judge Vincent J. Commisa signed an order allowing Impex Car Corp. to provide financing and take management control of the company, said Kenneth A. Rosen, a company attorney. Impex is an affilliate of Zavodi Crevna Zastava, the Yugoslavian manufacturer of the Yugo car.
''The purpose of the financing is to continue the sale of Yugo automobiles to dealers and to provide the supply of parts to dealers,'' said Rosen of the Roseland law firm of Ravin, Sarsohn, Cook, Baumgarten, Fisch and Baine.
Dick Loehr, a Yugo dealer in Kalamazoo, Mich., who also sells other lines of cars, said that during a meeting Monday in New Orleans, dealers tried to talk company officials out of filing the bankruptcy papers.
''The dealers thought that the investors group (behind Yugo) was a bottomless pit,'' he said, adding that the dealers had heard rumors about a possible bankruptcy filing for some time.
Toma Savic, a Yugo sales reprid. ''That's what happened.''
Yugo lists $30.5 million in assets and the same amount in liability and equity. Global Motors lists $27.4 million in each category. Proton America lists $10,000 in each.
''In the judgment of Global Motors Inc., it is desirable and in the best interests of this corporation, its creditors, stockholders and other interested parties that a petition be filed by this corporation seeking relief under the provisions of Chapter 11 ... ,'' the court papers said.
Mabon Nugent and Co., a New York investment banking company which invested $10.5 million in Global Motors and owns 33 percent of the company, said the bankruptcy filing was welcome.
''It is appropriate that the Yugoslavian manufacturer of the car has come forward with support necessary for the company to proceed. Hopefully, they will be able to complete a plan of reorganization and continue to serve Yugo dealers and customers,'' the banking concern said.
Yugo, based in Upper Saddle River, touted its boxy subcompact cars as the cheapest new auto in the United States when they went on sale in August 1985 at $3,995.
Sales topped 39,100 in the first 10 months of 1987, but dropped to 26,000 in the same period of 1988, according to figures released by the company.
Company attorneys were in consultation with a bankruptcy judge late Monday and were not available for comment. There was no answer at Global Motors offices.
The court papers said the filing was authorized by Marcel Kole, the company's chief financial officer and acting chief executive officer.
He said the company is committed to doing business in the United States.
''Obviously, there will be negative outflow from this,'' Kole said during the National Autleted.
In April 1988, Yugo had 300 employees and now has 60, said Kole.