IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: COLLINS & AIKMAN CORPORATION,

et al. Debtors. ) ) ) ) ) ) ) ) Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification # 13-3489233) Honorable Steven W. Rhodes

OBJECTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO GENERAL MOTORS CORPORATIONS AMENDED MOTION FOR CONTINGENT RELIEF FROM AUTOMATIC STAY TO OBTAIN POSSESSION OF TOOLING The Official Committee of Unsecured Creditors (the Committee) of Collins & Aikman Corporation, et al. (collectively, the Debtors) by and through its undersigned counsel, hereby submits this objection (the Objection) to the Amended Motion of General Motors Corporation (GM) for Contingent Relief from Automatic Stay (the Amended Motion). In support of this Objection, the Committee respectfully represents as follows: OBJECTION The Committee Restates And Incorporates The Arguments Made In Its Objection to GMs Original Tooling Motion 1. In its original Motion for Contingent Relief from Automatic Stay to Obtain

Possession of Tooling (First Tooling Motion), GM sought authority to enter the Debtors facilities to take immediate possession of certain Tooling1 in the event the Debtors were unable to provide GM with the Component Parts by virtue of the Debtors actions, unwillingness to manufacture the Component Parts or inability to continue to supply GM with the Component Parts.

All capitalized terms not defined herein shall have the meanings ascribed to them in the Amended Motion.

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2.

In its Objection to GMs First Tooling Motion (the First Objection),2 the

Committee noted that GM failed to establish that it was entitled to relief from the automatic stay, and that the First Tooling Motion should therefore be denied, for the following reasons. First, to the extent that GMs motion sought the right to repossess Tooling without further order from the Court, such relief was outside the scope of a motion for relief from the automatic stay pursuant to Rule 4001 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). In order to obtain such relief, GM was required to (a) commence an adversary proceeding in this Court or (b) limit the relief sought in its motion to a request for authority to pursue the remedies it seeks in the relevant state courts. Second, GMs Motion raised numerous questions of law and fact requiring discovery and an evidentiary hearing to resolve, including: a. what interests the Debtors have in the Tooling; b. what interests GM has in the Tooling; c. whether the Debtors and GM have a bailor/bailee relationship with respect to the Tooling; d. whether the Tooling transactions evidence sale transactions or disguised financings; e. if GM is entitled to the Tooling based on the Debtors inability to produce Component Parts, how such a determination is to be made; f. whether the provisions of the Terms and Conditions are enforceable against the Debtors or, instead, contain unconscionable and unenforceable terms; g. the veracity of GMs allegations that it would suffer immediate harm absent relief from the stay at this time; h. whether third parties with liens on the Tooling are indispensable parties to this proceeding and must be given adequate and proper notice; and i. whether the Tooling is necessary to the Debtors reorganization. Third, GM failed to meet its burden that cause existed for obtaining relief from the automatic stay. The three primary factors relevant to a determination of whether cause exists all militated against granting GMs motion: a. Lifting the automatic stay would not resolve the issues raised in the First Tooling Motion. Lifting the automatic stay only affords GM the opportunity to pursue its rights under applicable non-bankruptcy law. Resolution of GMs actual rights with respect to the Tooling issues would require extensive litigation before either
In the interests of avoiding unnecessary repetition, we respectfully refer the Court to our First Objection for the relevant procedural background.
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this Court or another court of competent jurisdiction before GM would be entitled to take possession of or use the Tooling. b. Lifting the automatic stay would have a substantial negative effect on the Debtors estates. GM failed to establish its ownership interest in the Tooling or the Debtors lack of such interest. Moreover, if the automatic stay was lifted, the Debtors would have to expend substantial resources and time litigating GMs actual ownership interests in the Tooling, thus disrupting the Debtors reorganization efforts. c. The balance of harms weighs against lifting the automatic stay. Even if GM were permitted to remove the Tooling from the Debtors possession, GM would, in many circumstances, be unable to utilize the Tooling immediately if ever. On the other hand, the Debtors need to retain possession of the Tooling and continue manufacturing parts for GM in order to renegotiate its contracts with GM. Moreover, if GM takes possession of certain dual-purpose Tooling, and the Debtors reject only one of the contracts for which that Tooling is used, the Debtors will be forced to discontinue performance of all other Production Purchase Orders for which that Tooling is utilized, affording GM the right and opportunity to terminate all negotiations and relations with the Debtors despite their commitment to continue negotiations in good faith. Fourth, GM claimed that cause existed for the lifting the stay because its interests in the Tooling are not adequately protected. But GM, because of its status as unsecured creditor, has no legal or equitable right to adequate protection. Fifth, GM failed to establish that the Debtors have no equity in the Tooling, as required by section 362 of the Bankruptcy Code. Numerous factual and legal factors evidenced the Debtors equity in the Tooling including, without limitation, (a) the apparent lack of a bailment relationship between the Debtors and GM in respect of the Tooling; (b) GMs failure to pay the Debtors in full for the Tooling; (c) indicia of a secured financing transaction in respect of the Tooling as opposed to a sale transaction; and (d) setoff rights in favor of the Debtors against GM. Sixth, because the Tooling provides the Debtors with (a) the ability to renegotiate contracts with GM, (b) consolidate plants yet continue operating under certain contracts and (c) continue to produce parts for GM at an appropriate fee while contract renegotiations occur, the Tooling is necessary to the Debtors effective reorganization. 3. GM has now filed its Amended Motion, in which it purports to: (a) narrow the

scope of its motion to a subset of Relevant Tooling used in connection with certain GM programs; and (b) provide evidence in support of its contention that it has paid for the Relevant Tooling. But the mere fact that the Amended Motion narrowed the scope of the Tooling at issue does nothing to remedy the legal and factual defects of the First Tooling Motion. To the
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contrary, these defects apply equally to the Amended Motion. Therefore, the Committee reincorporates and restates herein the arguments made in its First Objection to GMs First Tooling Motion. 4. Moreover, the Committee understands that the Debtors dispute GMs claim that it

has fully paid for the Relevant Tooling. As the Court is aware, the parties have commenced discovery pursuant to a Court Order concerning the factual issues raised by the Amended Motion, including whether GM has fully paid for the Relevant Tooling. Accordingly, the Committee reserves the right to supplement and/or modify its objections to the Amended Motion following the conclusion of the discovery process. The Automatic Stay Applies to the So-Called Non-Debtor Bailed Tooling 5. Finally, GM claims in its Amended Motion that certain Relevant Tooling is not

subject to the automatic stay because GM contracted with non-debtor entities, including Collins & Aikman Canada Inc. (C&A Canada), to produce such tooling. GM incorrectly argues that section 362(a) of the Bankruptcy Code applies only to the debtor. See GM Amended Motion at 11-12. 6. First, the Committee does not concede that GM in fact contracted with non-debtor

entities to produce the Tooling. Moreover, even assuming that GM did contract with non-debtor entities, GMs assertion is incorrect as a matter of law. Courts have applied the protections of section 362(a) to non-debtor entities where, among other things: (1) the debtor and non-debtor entities had an identity of interest; or (2) an adverse judgment against the non-debtor entities would have immediate adverse economic consequence for the debtors estate. Queenie Ltd. v. Nygard Intl, 321 F.3d 282, 287-88 (2d Cir. 2003) (staying appeal proceedings against wholly owned non-debtor corporation as well as debtor); Badalament, Inc. V. Mel-O-Ripe Banana

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Brands, Ltd., 265 B.R. 732 (E.D. Mich. 2001) (extending automatic stay protection to non-debtor officer because strong relationship between non-debtor and debtor evidence identity of interest). 7. As stated above, the parties are currently conducting discovery concerning,

among other things, the relationship between the Debtors and other entities with whom GM contracted to produce the Tooling, as well as the impact granting the relief requested in GMs Amended Motion may have on the Debtors reorganization efforts. Accordingly, the Committee reserves the right to supplement its objections upon the conclusion of such discovery.

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CONCLUSION For all of the foregoing reasons, the Committee respectfully requests that the Court (i) deny GMs Amended Motion and (ii) grant the Committee such other relief as the Court deems just, proper and equitable. Dated: October 6, 2006

AKIN GUMP STRAUSS HAUER & FELD LLP

By:__/s/ Abid Qureshi_____________________________ Michael S. Stamer Abid Qureshi Philip C. Dublin Alexis Freeman 590 Madison Avenue New York, NY 10022-2524 Telephone: (212) 872-1000 Facsimile: (212) 872-1002 Email: mstamer@akingump.com aqureshi@akingump.com pdublin@akingump.com afreeman@akingump.com

BUTZEL LONG Thomas B. Radom, Esquire (P24631) 100 Bloomfield Hills Parkway, Suite 200 Bloomfield Hills, MI 48304 Telephone: (248) 258-1413 Facsimile: (248) 258-1439 Email: radom@butzel.com Counsel for the Official Committee of Unsecured Creditors

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