We discussed in a prior post the completion of the auction and bankruptcy court approval of sale of assets to an affiliate of Fluid Routing Solutions.  Despite its success in getting the sale approved, Fluid Routing Solutions was unable to obtain the concurrence of its automaker customers to the Proposed Sale Order. Fluid Routing Solutions advised the bankruptcy court in submitting the Proposed Sale Order to the bankruptcy court that Toyota, Chrysler, Ford and General Motors (the “Automaker Customers”) provided comments to the proposed order that were “wholly inconsistent with, and went far beyond, the requirements of the Agreement”.

The automakers apparently have substantial, unresolved concerns about the sale.  These concerns may be about product warranty liability (who is going to pay if there is a problem on product sold pre-closing), about the speed with which all this has occurred (the automakers have not been able to protect their interests), or about the ability of the Fluid Routing Solutions carcass (what was left behind by the buyer, “FRS Deux”) to continue manufacturing parts for the automakers.

How big a problem is leaving automaker concerns (whatever they are) unresolved?  Fluid Routing Solutions went on tell the bankruptcy court that:

Moreover, the Purchaser has now determined to exclude all of the Customers contracts from the list of Assumed Obligations, which thus renders the Customers’ comments moot. As such, the Customers’ comments were not accepted in the Proposed Sale Order.

The decision to go forward without the concurrence of the automakers seems strange.  Without the continued business of the Automaker Customers it is difficult to understand how either the FRS Deux or Fluid Routing Solutions will be able to maintain viability.

The sale of assets from Fluid Routing Solutions to FRS Deux is to occur very quickly.  Perhaps, FRS Deux anticipates that the lack of an alternative supplier will force the Automaker Customers to come to terms with FRS Deux.  If this is the strategy, the requirements for substitute part verification indeed may force the automakers to compromise or abandon their concerns.  However, such a strategy would also be very risky and, probably, relationship damaging.  The automakers hate to be put in a position where they have no choice.  That strategy ultimately backfired with Cadence Innovation.

Worse yet would be a situation where the carcass of Fluid Routing Solutions was unable to continue to supply. For the automakers, that would have to be the ultimate sin.

The question of the post is “Will the relationship between the automakers and FRS Deux survive the legal maneuvers?”  If anyone wants to start a pool, we are in for “no”.