UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

In re: COLLINS & AIKMAN CORPORATION, et al.1 Debtors. ) Chapter 11

) ) Case No. 05-55927 (SWR) ) ) ) ) ) ) ) )

(Jointly Administered) (Tax Identification #13-3489233) Honorable Steven W. Rhodes Sale Approval Relief Hearing Date: May 17, 2007 at 9:30 a.m. Sale Approval Relief Objection Deadline: May 11, 2007 at 4:00 p.m.

OBJECTION OF FORD MOTOR COMPANY S.A. DE C.V. AND FORD MOTOR COMPANY TO (A) DEBTORS MOTION FOR THE ENTRY OF ORDERS APPROVING BIDDING PROCEDURES, SALE OF CERTAIN OF THE ASSETS OF THE DEBTORS INTERIORS PLASTICS GROUP FREE AND CLEAR OF LIENS, CLAIMS, ENCUMBRANCES AND INTERESTS AND RELATED RELIEF; AND (B) PROPOSED ASSUMPTION AND ASSIGNMENT OF PLANT LEVEL CONTRACTS TOOLS COMODATO CONTRACT WITH FORD MOTOR COMPANY S.A. DE C.V.
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The Debtors in the jointly administered cases include: Collins & Aikman Corporation; Amco Convertible Fabrics, Inc.,

Case No. 05-55949; Becker Group, LLC (d/b/a/ Collins & Aikman Premier Mold), Case No. 05-55977; Brut Plastics, Inc., Case No. 05-55957; Collins & Aikman (Gibraltar) Limited, Case No. 05-55989; Collins & Aikman Accessory Mats, Inc. (f/k/a the Akro Corporation), Case No. 05-55952; Collins & Aikman Asset Services, Inc., Case No. 05-55959; Collins & Aikman Automotive (Argentina), Inc. (f/k/a Textron Automotive (Argentina), Inc.), Case No. 05-55965; Collins & Aikman Automotive (Asia), Inc. (f/k/a Textron Automotive (Asia), Inc.), Case No. 05-55991; Collins & Aikman Automotive Exteriors, Inc. (f/k/a Textron Automotive Exteriors, Inc.), Case No. 05-55958; Collins & Aikman Automotive Interiors, Inc. (f/k/a Textron Automotive Interiors, Inc.), Case No. 05-55956; Collins & Aikman Automotive International, Inc., Case No. 05-55980; Collins & Aikman Automotive International Services, Inc. (f/k/a Textron Automotive International Services, Inc.), Case No. 05-55985; Collins & Aikman Automotive Mats, LLC, Case No. 05-55969; Collins & Aikman Automotive Overseas Investment, Inc. (f/k/a Textron Automotive Overseas Investment, Inc.), Case No. 05-55978; Collins & Aikman Automotive Services, LLC, Case No. 05-55981; Collins & Aikman Canada Domestic Holding Company, Case No. 05-55930; Collins & Aikman Carpet & Acoustics (MI), Inc., Case No. 05-55982; Collins & Aikman Carpet & Acoustics (TN), Inc., Case No. 05-55984; Collins & Aikman Development Company, Case No. 05-55943; Collins & Aikman Europe, Inc., Case No. 05-55971; Collins & Aikman Fabrics, Inc. (d/b/a Joan Automotive Industries, Inc.), Case No. 05-55963; Collins & Aikman Intellimold, Inc. (d/b/a M&C Advanced Processes, Inc.), Case No. 05-55976; Collins & Aikman Interiors, Inc., Case No. 05-55970; Collins & Aikman International Corporation, Case No. 05-55951; Collins & Aikman Plastics, Inc., Case No. 05-55960; Collins & Aikman Products Co., Case No. 05-55932; Collins & Aikman Properties, Inc., Case No. 05-55964; Comet Acoustics, Inc., Case No. 0555972; CW Management Corporation, Case No. 05-55979; Dura Convertible Systems, Inc., Case No. 05-55942; Gamble Development Company, Case No. 05-55974; JPS Automotive, Inc. (d/b/a PACJ, Inc.), Case No. 05-55935; New Baltimore Holdings, LLC, Case No. 05-55992; Owosso Thermal Forming, LLC, Case No. 05-55946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 05-55962; and Wickes Manufacturing Company, Case No. 05-55968.

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Ford Motor Company S.A. de C.V. (Ford of Mexico) and Ford Motor Company (together with Ford of Mexico, Ford) object to (a) the sale, transfer, assignment, conveyance or delivery of any purchase orders or other Contracts2 between Ford of Mexico or Ford Motor Company and Collins & Aikman Automotive Hermosillo S.A. de C.V. (C&A Hermosillo), a non-debtor Mexican subsidiary of the Debtors, to Cadence Innovation LLC (Cadence), and (b) the assumption and assignment to Cadence of the Plant Level Contracts Tools Comodato Contract with Ford of Mexico. A. 1. Background

Ford Motor Company is a customer for which production parts are

produced at the Athens, Tennessee facility. Ford of Mexico is a customer for which production parts are produced at the Saltillo, Mexico facility, and the sole, 100%, customer for which parts are produced at C&A Hermosillos Hermosillo, Mexico facility. 2. On April 2, 2007, the Debtors filed their Debtors Motion for the Entry of

Orders Approving Bidding Procedures, Sale of Certain Assets of the Debtors Interior Plastics Group Free and Clear of Liens, Claims, Encumbrances and Interests and Related Relief (Motion)3 [Docket No. 4408]. On April 19, 2007, the Court entered an order approving certain bidding procedures and buyer protections (Bidding Procedures Order) [Docket No. 4532], which, among other things, (a) set a May 17, 2007 hearing date to consider authorizing and approving the proposed sale (Sale Approval Relief) to

All defined terms that are used but not defined in this Objection will have the meanings ascribed to those terms in the Motion [Docket No. 4408] or the Asset Purchase Agreement attached to the Motion as Exhibit C. On April 9, 2007, Ford Motor Company S.A. de C.V. and Ford Motor Company filed a response [Docket No. 4450] to the Motion reserving their rights to object to the Sale Approval Relief and raising the same issues concerning the need for the consent of Ford of Mexico to any assignment of its purchase orders with C&A Hermosillo.
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Cadence (or offeror of a higher or better bid)4; and (b) established a procedure for the assumption and assignment of Assumed Agreements.5 3. Ford has no objection to the sale to Cadence of the Athens, Tennessee or

Saltillo, Mexico plants, or to the sale and assignment of the Ford purchase orders for parts currently produced at those plants by the Debtors. However, Ford of Mexico does object and does not consent to the sale and assignment to Cadence (or, without Ford of Mexicos prior written consent, to any other prospective purchaser) of any of its purchase orders or other Contracts (including tooling comodato) with C&A Hermosillo.

B.

Objection to Sale and Assignment of Purchase Orders and other Contracts

4.

The Asset Purchase Agreement dated as of March 30, 2007 (APA) is by

and among Cadence, as Purchaser, and Collins & Aikman Corporation, Collins & AIkman Products Co., Collins & Aikman Automotive Exteriors Inc., and Collins & Aikman Automotive Interiors Inc. (collectively, Sellers), four chapter 11 Debtors. All Sellers are parties that are subject to these bankruptcy cases and this Courts power and authority to administer their assets. C&A Hermosillo is not. It is not a Debtor and its assets and other property are not subject to the administration of this Court, sections 363 or 365 of the Bankruptcy Code, or the Customer Agreement.

The May 11 deadline for filing objections to the proposed sale occurs prior to the May 14 auction date established in the event that a higher or better offer is submitted on May 10, 2007, pursuant to the Bidding Procedures Order. Ford of Mexico and Ford Motor Company reserve the right to file supplemental, different or additional objections to the proposed sale. Under the APA, Assumed Agreements, include Assumed Contracts, which include Contracts that are Designated Contracts.
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5.

The APA and the proposed Sale Approval Order6 are less than crystal

clear in what they intend to accomplish and how they intend to accomplish it. However, they appear to be seeking more than simply this Courts authorization of the Debtors to cause non-debtor C&A Hermosillo to enter into and implement the Mexican Agreement.7 It appears that under the APA and Sale Approval Order the Debtors seek and intend, to sell, transfer, assign, convey and deliver to Cadence, and vest in Cadence, free and clear of Liens (which includes any restriction on transfer or assignment under the proposed Sale Approval Order), the underlying assets of C&A Hermosillo, including its purchase orders and other Contracts with Ford of Mexico.8 6. Ford of Mexico and Ford Motor Company object to the approval of the

APA and the Sale Approval Order to the extent that they propose to sell, transfer, assign, convey or deliver, or effectuate the sale, transfer, assignment, conveyance or delivery of, any of the purchase orders or other Contracts between C&A Hermosillo and
The proposed Order (A) Approving Asset Purchase Agreement, (B) Authorizing the Sale of Certain of Debtors Interiors Plastics Group Free and Clear of all Liens, Claims, Encumbrances and Other Interests, (C) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases in Connection Therewith and (D) Granting Related Relief (Sale Approval Order) is attached to the Motion as Exhibit B. As of the date of this Objection, Ford has received neither draft nor final copies of the Mexican Agreement, Ancillary Agreements nor any of the Schedules to the APA despite its requests for copies of those documents. On May 8, 2007, counsel for Ford of Mexico learned, by reviewing a Certificate of Service [Docket No. 4670] on file with the Court, that a Notice of Sale of Assets of Debtors Interiors Plastics Group Free and Clear of Liens, Claims, Encumbrances and Interests (Sale Notice) was sent, by first-class mail, addressed to Ford of Mexico at an address in Mexico, notifying Ford of Mexico that it was a counter-party to agreements that the Debtors may seek to assume and assign in connection with the Sale. As of May 11, 2007, Ford of Mexico still had not received a copy of the Sale Notice. Service on a foreign corporation at a foreign address outside of the United States by first-class mail may be improper service pursuant to Bankruptcy Rules 9014 and 7004. On September 20, 2006, a Declaration of Jonathan S. Green of Miller, Canfield, Paddock & Stone, P.L.C., Pursuant to Federal Rule of Bankruptcy Procedure 2019 was filed in these cases [Docket No. 3353] disclosing that Miller, Canfield represented Ford of Mexico, Ford Motor Company and other parties in these bankruptcy cases. No Sale Notice concerning any Ford of Mexico purchase orders or other Contracts was received by Miller, Canfield.
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Ford of Mexico,9 to Cadence or, without the prior written consent of Ford of Mexico, to any other prospective purchaser. 7. C&A Hermosillo is a Mexican entity, formed and operating in Hermosillo,

Mexico. Upon information and belief, the only assets or other interests that any of the Debtors has to sell in respect of C&A Hermosillo is 1% of the stock of C&A Hermosillo, which is owned by Debtor Collins & Aikman International Corporation (CAIC),10 and 99% of the stock CAIC holds in another non-debtor Mexican entity, Collins & Aikman Holdings, S.A. de C.V. (Holdings). Upon further information and belief, Holdings, in turn, owns the other 99% of the stock of C&A Hermosillo. None of the Debtors holds any interest in the underlying assets of C&A Hermosillo, such as the purchase orders and other Contracts between C&A Hermosillo and Ford of Mexico.11 8. The sale, assignment or any other disposition of the assets of C&A

Hermosillo is not subject to the administration of this Court. C&A Hermosillo continues to operate as part of C&A outside of . . . [these bankruptcy] proceedings.12 The Debtors can not sell and assign purchase orders and other Contracts to which they are
9

To the extent any of the Contracts are with Ford Motor Company, Ford Motor Company also objects to the assumption and assignment of its purchase orders and Contracts. Under paragraphs 6 and 7 of the Bidding Procedures Order, a Sale Notice identifying the potential Assumed Agreements was required to be served within five business days after the entry of the Bidding Procedures Order, or by April 26, 2007 at the latest. To date, Ford Motor Company has received four such Sale Notices through its counsel, but none of the Sale Notices has identified any Assumed Agreement that the Debtors propose to be assumed and assigned under the APA.
10 11

Collins & Aikman International Corporation is not a Seller under the APA.

In the Liquidation Analysis attached as Exhibit C to the Amended Disclosure Statement for First Amended Joint Plan of Collins & Aikman Corporation and its Debtor Subsidiaries (Disclosure Statement) [Docket No. 4160] at note 7, page C-6, the Debtors state that their foreign non-debtor subsidiaries -- which include C&A Hermosillo and Holdings -- are insolvent and, as a result, that the Debtors equity investments in their foreign non-debtor subsidiaries have no value.
12

Disclosure Statement, Section B, p.2.

not party. The purchase orders and other Contracts for parts made at C&A Hermosillos Hermosillo Mexico facility are between Ford of Mexico and non-debtor C&A Hermosillo. 9. Sections 363 and 365 of the Bankruptcy Code do not apply to purchase

orders or other Contracts between Ford of Mexico and C&A Hermosillo because the Contracts are not executory contracts . . . of the debtor13 or property of any Debtors estate.14 C&A Hermosillo is not a debtor in these bankruptcy cases, and none of the Debtors that is a debtor in these bankruptcy cases is a party to C&A Hermosillos purchase orders and other Contracts with Ford of Mexico. Rather, the purchase orders and other Contracts are agreements between two non-debtor Mexican entities and are governed by Mexican law (Ford Production Purchasing Global Terms and Conditions (PPGTC Jan. 1, 2004) (Global Terms) 39.07)15. The purchase orders and other Contracts between Ford of Mexico and C&A Hermosillo can be assigned only with the prior written consent of Ford of Mexico. Section 42.04 of the Global Terms expressly provides that [t]he Supplier [C&A Hermosillo] may not assign or delegate any of its obligations without obtaining the Buyers [Ford of Mexicos] prior written consent. This consent has not been given. Ford of Mexico does not consent to the sale, transfer, assignment, conveyance or delivery of any of its purchase orders or other Contracts

13

A debtor means person . . . concerning which a case under this title has been commenced. 11 U.S.C. 101(13).

The only legal or equitable interest of any of the Debtors in C&A Hermosillo is Debtor CAICs 1% interest in the stock of C&A Hermosillo. See paragraph 7 above.
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14

Section 39.07 of the Global Terms provides [t]he Purchase Order will be governed by the laws of the Buyers principal place of business without regard to any conflict of laws provisions that might otherwise apply.

with C&A Hermosillo to Cadence or, without its prior written consent, to any other prospective purchaser.16 10. Nor are the purchase orders and other Contracts between C&A Hermosillo

and Ford of Mexico subject to sale under section 363, free and clear of any Liens for the same reasons discussed in paragraph 9 above. Yet this appears to be precisely what the Debtors are attempting to do. Paragraph 6 of the proposed Sale Approval Order would have this Court approve the sale of the Purchased Assets, which appear to include the purchase orders and other Contracts of C&A Hermosillo, free and clear of all Liens. Proposed Finding U of the Sale Approval Order defines Lien to include restrictions on or conditions to transfer or assignment of any kind. Again, the purchase orders and other Contracts between C&A Hermosillo and Ford of Mexico (or Ford Motor Company) are not contracts of the Debtors or property of the estate that can be sold by the Debtors free and clear of restrictions on the transfer or assignment of those purchase orders and Contracts. Thus they can not be sold free of Section 42.04 of the Global Terms, which requires Ford of Mexicos prior written consent. 11. Additionally, neither C&A Hermosillo nor Ford of Mexico is a party to the

Customer Agreement. The Customer Agreement, which was approved on a final basis by this Court on January 11, 2007, was the product of extensive, difficult, informed and

16

According to section 2.5(e) of the APA, the APA does not constitute an agreement to assume and assign any Contract that requires a third party consent, if an attempted assumption and assignment of the Contract without that third party consent would constitute a breach or default of the Contract. Section 2.5(e) of the APA provides as follows: (e) Consents to Assignment. Notwithstanding anything in this Agreement [the APA] to the contrary, this Agreement shall not constitute an agreement to assume and assign any Contract, or any claim or any right or any benefit of Sellers arising thereunder or resulting therefrom, if an attempted assumption and assignment thereof, without the consent of a third party, would constitute a breach of default thereof, or give rise to a right of termination, cancellation, payment or other obligation thereunder, and such consent has not been obtained prior to the Closing Date.

arms-length negotiations over the course of a few months. It is clear from the Customer Agreement and the papers filed to approve the Customer Agreement that C&A Hermosillo was intentionally excluded from the process and the commitments memorialized in the Customer Agreement.17 The Parties to the Customer Agreement expressly exclude C&A Hermosillo (Customer Agreement, 1), and do not include Ford of Mexico or any of Ford Motor Companys affiliates or subsidiaries except AutoAIliance International, Inc. (AAI),18 which is expressly included as a separate party to the Customer Agreement. Nor is C&A Hermosillos Hermosillo, Mexico facility listed as either a Sale Facility (Exhibit G) or an Unsold Plastics Plant (Exhibit I) under the Customer Agreement. The fact that Cadence wants to include the purchase orders and other Contracts of C&A Hermosillo in the package of assets to be purchased by it does not change that fact. 12. Ford of Mexicos purchase orders and other Contracts with C&A

Hermosillo are not subject to this Courts administration. But even if they were, and even if they were subject to section 365 (which they are not), section 365 would require that they be assumed and assigned in their entirety and without modification (unless such modifications were expressly agreed to by Ford of Mexico), at their original contract pricing. 13. In addition, if the purchase orders and other Contracts between C&A

Hermosillo and Ford of Mexico were subject to the jurisdiction of this Court, and if sections 363 and 365 were applicable to the sale and assignment of those purchase

17

As such, the concept of a Qualified Buyer described in section 10 of the Customer Agreement does not apply to C&A Hermosillo or Ford of Mexico. AAI is a 50/50 joint venture between Ford Motor Company and Mazda Corporation.

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orders and other Contracts (which they are not), then, at a minimum, (a) all of the damages sustained by Ford resulting from the breach of the purchase orders to be assumed would have to be paid to Ford of Mexico as cure, (b) the purchase orders could only be assumed as written, cum onere, and at the contractual purchase order piece price, and (c) Ford of Mexico would have to receive adequate assurance of future performance of the purchase orders as written and as assumed and assigned. 14. In October 2006, C&A Hermosillo breached its purchase orders and

certain other Contracts with Ford of Mexico. Specifically, on October 13, 2006, C&A Hermosillo stopped delivering parts to Ford of Mexico resulting in a shut down of Ford of Mexicos production lines. The damage sustained by Ford of Mexico resulting from the shut down of those production lines and the continuing damage that would have been sustained by Ford of Mexico and Ford Motor Company if the shut down had continued for any extended period of time left Ford of Mexico with no choice but to pay, under protest, the increased piece price unilaterally imposed by C&A Hermosillo on Ford of Mexico in order for production to recommence and in order to mitigate then existing and future damages. This additional amount has been paid by Ford of Mexico ever since and has created a damage claim in the tens of millions of dollars.19 This cure amount would have to be paid to Ford of Mexico as part of any assumption and assignment -- if such assumption and assignment were possible under section 365 of the Bankruptcy Code.

19

The Debtors can readily calculate the minimum amount of this damage claim pursuant to the formula set forth in paragraph 16(b) of this Objection.

C.

Objection to Proposed Assumption and Assignment of Plant Level Contracts Tools Comodato Contract with Ford of Mexico According to a Certificate of Service filed in these cases on May 8, 2007

15.

[Docket No. 4670], notice was mailed to Ford of Mexico designating it as a counterparty to agreements that the Debtors may assume in connection with the sale of the Debtors Interiors Plastics Group.20 The agreements were identified collectively as Plant Level Contracts Tool Comodato Contract and the proposed Cure Amount was shown as $0.21 16. The description of the Assumed Agreements as Plant Level Contracts

Tool Comodato Contract is sufficiently vague so that Ford has to make certain assumptions about which particular Contracts were proposed to be treated as Assumed Agreements. The particular Contracts were not identified. Ford of Mexico incorporates by reference paragraphs 1 through 14 above. Ford of Mexico summarizes its objections to the proposed assumption and assignment of the Assumed Agreements and the proposed $0 Cure Amount as follows: (a) To the extent the Assumed Agreements are between C&A Hermosillo and

Ford of Mexico, two non-debtor Mexican entities, or between C&A Hermosillo and Ford Motor Company, two non-debtor entities, they are not subject to assumption and assignment or sale, under section 363, 365 or otherwise, without the prior written consent of Ford of Mexico (or Ford Motor Company), which Ford of Mexico (and Ford Motor Company) do not give. C&A Hermosillo is not a Debtor and its assets, Assumed

20

Upon information and belief, Ford of Mexico is not currently a counterparty to any Contracts with any of the Sellers. See footnote 8 above.

21

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Agreements and Contracts are not property of the estate to be administered by this Court or otherwise subject to the Bankruptcy Code. (b) Even if the Assumed Agreements were subject to section 365 of the

Bankruptcy Code and could be assumed and assigned, the applicable Cure Amount is not $0 but is tens of millions of dollars based on the difference between the purchase order or contract price under those Assumed Agreements and the price imposed on Ford of Mexico since October 13, 2007, resulting from the actions described in paragraph 14 above. As for documentation of this amount, copies of the Assumed Agreements are in the possession of the Debtors.22 To determine the minimum cure amount, the Debtors just need to subtract (i) the purchase order contract piece price multiplied by the number of sets sold to Ford of Mexico since October 13, 2006, from (ii) the amounts Ford of Mexico has paid since October 13, 2006 for those parts produced and delivered to Ford of Mexico under the Assumed Agreements. 17. Ford of Mexico does not consent to the assumption and assignment of the

Plant Level Contracts Tool Comodato Contract identified as Assumed Agreements, the proposed Cure Amount associated with those Assumed Agreements, or to the Sale, to the extent its purchase orders and other Contracts with C&A Hermosillo are included in the Sale.

22

Again, it is not clear which purchase orders and other Contracts with Ford of Mexico are intended to be Assumed Agreements.

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D. 18.

Further Reservations of Rights

Ford has received neither draft nor final copies of any of the Schedules to

the APA, the proposed Mexican Agreement nor any of the Ancillary Agreements. As a result, Ford may have different, additional or supplementary objections based on those Schedules and Agreements, and reserves all rights in connection with those Schedules and Agreements. 19. More specifically, some of the Equipment, Inventory, Non-PPAP Tooling,

PPAP Tooling and other property described in section 2.1 of the APA and the various Schedules contemplated in section 2.1 of the APA may be owned by Ford of Mexico or Ford Motor Company (collectively, Ford Property), and should not be included among the Purchased Assets. 20. Ford of Mexico and Ford Motor Company reserve all rights to object to any

other prospective purchaser of some or all of the Purchased Assets or Assumed Agreements, or any proposed modification of the Sale Approval Order.

WHEREFORE, Ford of Mexico and Ford Motor Company respectfully request that the Court (a) deny approval of the Sale to Cadence (or, without the prior written consent of Ford, to any other prospective purchaser) on the terms set forth in the APA and the Sale Approval Order, unless the APA and Sale Approval Order are modified to expressly exclude from the Purchased Assets and Assumed Agreements (i) the purchase orders and other Contracts, including the Assumed Agreements, between C&A Hermosillo on the one hand, and Ford of Mexico or Ford Motor Company on the

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other hand, and (ii) the Ford Property, and (b) grant such other and further relief as may be appropriate and just. Respectfully submitted, MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.

By: /s/ Jonathan S. Green Jonathan S. Green (P33140) Attorneys for Ford Motor Company S.A. de C.V. and Ford Motor Company 150 West Jefferson, Suite 2500 Detroit, MI 48226 (313) 496-7997 green@millercanfield.com May 11, 2007
DELIB:2852572.1\029982-00171 DRAFT 05/11/07

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