Importer of Yugo Autos Seeks Bankruptcy Shield
Yugo America Inc., the troubled importer of inexpensive Yugoslavian-made cars, its parent company and an affiliate filed for protection under the U.S. Bankruptcy Code on 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% fewer than in 1987.
Yugo, based in Upper Saddle River, N.J., 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 awhile now,” said auto analyst Chris Cedergren of J. D. Power & 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 affiliate 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,” Rosen said.
Mabon Nugent & Co., a New York investment banking company that invested $10.5 million in Global Motors and owns 33% 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 in a statement.
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 representative from Yugoslavia, said after the dealers meeting that filing the papers will make it easier for Yugo to stay in business in the United States.
There are about 250 dealers in the United States selling the Yugo, a boxy subcompact car billed as the cheapest new auto in the United States when it went on sale in August, 1985, at $3,995.
Automobile analyst Kathleen Heaney of Nikko Securities Co. International said the car’s design may have been to blame for the companies’ problems.
“I just think it wasn’t attractive, and you might as well spend the extra thousand and get something else,” she said. “That’s what happened.”
Marcel Kole, the company’s acting chief executive, said the company is committed to doing business in the United States and filed for protection because of an inability to create cash flow.