UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION IN RE: Chapter 11 COLLINS & AIKMAN CORPORATION,

et al., Debtors. Honorable Steven W. Rhodes GENERAL ELECTRIC CAPITAL CORPORATIONS RESPONSE TO DEBTORS MOTION FOR CONTINGENT TO ENTER INTO AGREEMENT WITH HONDA FOR IMMEDIATE PRICE RELIEF AND OTHER RELATED RELIEF This Response is filed by GENERAL ELECTRIC CAPITAL CORPORATION (GECC), a secured creditor and party- in-interest in the jointly administered Chapter 11 cases (the Bankruptcy Cases) of Collins & Aikman Corporation and other affiliated debtors and debtors- in-possession (collectively, the Debtors). GECC files this Response with respect to the motion entitled Debtors Motion For Order Authorizing Entry Into Agreement With Honda Of America Manufacturing, Inc. Providing For Immediate Price Relief And Other Related Benefits (the Honda Motion) [Docket No. 1147], which has been filed by Daimler/Chrysler Corporation (Daimler/Chrysler). In the Daimler/Chrysler Tooling Motion, Daimler/Chrysler asks for certain contingent relief from the automatic stay in the Debtors Bankruptcy Cases to obtain possession of machine tooling if the Debtors actually suffer certain types of bus iness interruptions that Daimler/Chrysler describes. See Daimler/Chrysler Tooling Motion at 12. The Case No. 05-55927-R (Jointly Administered)

Daimler/Chrysler Tooling Motion does not present any issue for determination by the Court other than the request for contingent stay relief to obtain possession of the identified machine tooling if the described events actually occur.

QBPHX\023718.00002\1959637.1

0W[;%)<

0555927050928000000000017

1e

As a threshold matter, GECC responds that the Daimler/Chrysler Tooling Motion does not present any justiciable controversy for determination by the Court unless and until the events described by Daimler/Chrysler actually occur. Whether there is any basis for stay relief should be evaluated upon a record of actual (not hypothetical) events. As of GECCs preparation of this Response, GECC is informed and believes that the events described by Daimler/Chrysler have not occurred. In all events, GECC files this Response as a precautionary measure to ensure that any relief Daimler/Chrysler may obtain, when and if the Daimler/Chrysler Tooling Motion becomes ripe for adjudication, is neutral with respect to and does not adjudicate or affect any of the following issues: (a) how much Daimler/Chrysler owes on prepetition accounts receivable of the Debtors that have been assigned to and are owned by GECC; (b) GECCs first and prior ownership interest in and lien on all such prepetition accounts receivable; (c) any adverse claims or defenses Daimler/Chrysler may assert in opposition to payment of prepetition accounts receivable of the Debtors; and (d) the priority of GECCs ownership interest and lien rights in such prepetition accounts receivable vis--vis any adverse claims or defenses to payment that Daimler/Chrysler may assert. All of these issues are the subject of a pending Adversary

Proceeding requesting declaratory judgment and related relief that GECC has filed against the Debtors, Daimler/Chrysler, and other Defendants (as cited below). None of these issues are presented in the Daimler/Chrysler Tooling Motion and Daimler/Chrysler does not request any relief (or provide any grounds for relief) regarding such issues in the Daimler/Chrysler Tooling Motion. In further response to the Daimler/Chrysler Tooling Motion, GECC states as follows: I. GECCS INTEREST RECEIVABLE. IN THE DEBTORS PRE-PETITION ACCOUNTS

2
QBPHX\023718.00002\1959637.1

1.

Pursuant to an Amended and Restated Receivables Purchase Agreement

(as amended from time to time, the RPA) among Debtor Collins & Aikman Products Co. and its wholly owned direct and indirect subsidiaries or affiliates named therein, as seller (the Sellers), and Carcorp, Inc., as purchaser, the Sellers sold, assigned and transferred to Carcorp, Inc. all of their right, title and interest in and to the Receivables, the Related Security, the Collections, and the Proceeds (as each term is defined in the document hereinafter identified as the RTA, which itself is defined below). A true and correct copy of the RPA has been filed in the record of the Bankruptcy Cases (see Docket No. 433); and the RPA is known to the Debtors and to Daimler/Chrysler. GECC incorporates the RPA by reference in this Response. 2. Pursuant to a Receivables Transfer Agreement (as amended and

restated, the RTA) among Carcorp, Inc., as transferor, the Sellers, as sellers and as collection agent, and GECC, as administrative agent and committed purchaser, Carcorp, Inc. sold, assigned and transferred to GECC all right, title and interest in and to the Receivables, the Related Security, the Collections, and the Proceeds (collectively, and as each term is defined in the RTA, the Prepetition Receivables); and Carcorp, Inc. transferred to GECC, as administrative agent, liens and security interests in the Prepetition Receivables. A true and correct copy of the RTA has been filed in the record of the Bankruptcy Cases (see Docket No. 433); and the RTA is known to the Debtors and to Daimler/Chrysler. GECC incorporates the RTA by reference in this Response. The RPA and the RTA are called separately and collectively the Securitization Documents. 3. Pursuant to the Securitization Documents, GECC owns the Prepetition

Receivables (including the Daimler/Chrysler Prepetition Receivables, as that term is defined below). The Debtors estates, through their one hundred percent (100%) equity ownership of

3
QBPHX\023718.00002\1959637.1

Carcorp, Inc., have a residual interest in the Prepetition Receivables (including the Daimler/Chrysler Prepetition Receivables) after GECC has been paid in full in accordance with the Securitization Documents. 4. Until all amounts due and owing to GECC under the Securitization

Documents (including the RTA) have been paid in full, GECC is the owner of, among other assets, the Daimler/Chrysler Prepetition Receivables and GECC asserts continuing, valid and perfected, first and prior liens on and security interests in, among other assets, all unpaid Daimler/Chrysler Prepetition Receivables. 5. GECC is owed (computed as of September 2, 2005) approximately $35.7

million under the Securitization Documents (including the RTA), plus accrued and accruing interest, attorneys fees, costs and other charges recoverable by GECC under the Securitization Documents. 6. Daimler/Chrysler (including various affiliates identified collectively with

Daimler/Chrysler as the Daimler/Chrysler Defendants in the Adversary Proceedingall Daimler/Chrysler for purposes of this Response) is an account debtor and obligor to the Debtors with respect to certain unpaid Prepetition Receivables (the Daimler/Chrysler Prepetition Receivables). GECC is informed and believes that Daimler/Chrysler (including its affiliates among the Daimler/Chrysler Defendants) owes approximately $61.3 million in the aggregate of unpaid Daimler/Chrysler Prepetition Receivables as of September 2, 2005. Certain of the Daimler/Chrysler Prepetition Receivables were generated under purchase orders for machine tooling. II. THE DISPUTES REGARDING THE PREPETITION RECEIVABLES. 7. GECC has made demand on the Debtors, in their capacity as collection

agent under the Securitization Documents (including the RTA), to collect Prepetition 4
QBPHX\023718.00002\1959637.1

Receivables from the applicable account debtors (including Daimler/Chrysler), and to forward all such collections immediately to GECC in accordance with the Securitization Documents. Daimler/Chrysler has failed and refused to pay the Daimler/Chrysler Prepetition Receivables to the Debtors as collection agent or to GECC. 8. Daimler/Chrysler asserts adverse claims or interests (which

Daimler/Chrysler may characterize as setoffs, recoupments, or other alleged adverse claims or interests) with respect to the Daimler/Chrysler Prepetition Receivables. See Daimler/Chrysler Corporations Motion For Relief From Stay To Effect Setoff [Docket No. 1083] (the Setoff Motion). 1 GECC disputes such adverse claims or interests and, in all events, GECC asserts that its interests in the Daimler/Chrysler Prepetition Receivables are prior and superior in all respects to any adverse claims or defenses to payment which Daimler/Chrysler may assert. 9. In light of these disputes regarding Daimler/Chrysler (and in light of

similar disputes with certain General Motors entities), GECC has filed a Complaint against the Debtors, Carcorp, Daimler/Chrysler, and other Defendants who owe Prepetition Receivables. See General Electric Capital Corporations Complaint For Declaratory Judgment And Related Relief (the GECC Complaint), which is pending before the Court in Adversary Proceeding No. 05-05689 (the Adversary Proceeding). [Adversary Docket No. 1]. The GECC Complaint in the Adversary Proceeding seeks declaratory judgment and related enforcement relief adjudicating, ranking, and enforcing the competing interests of GECC, the Debtors and Carcorp, and the Customer Defendants (including Daimler/Chrysler) with respect to the Subject Prepetition Receivables described in the Complaint.

By consent of Daimler/Chrysler and as approved by the Court, proceedings on the Setoff Motion have been adjourned, and the Court has not set a hearing to consider the Setoff Motion or set a deadline for filing responses to the Setoff Motion.

5
QBPHX\023718.00002\1959637.1

10.

Accordingly,

all

issues

regarding

the

amount

owing

from

Daimler/Chrysler in relation to the Daimler/Chrysler Prepetition Receivables and the respective rights of GECC, the Debtors, and Daimler/Chrysler are part of the subject matter of the pending Adversary Proceeding. III. THE LIMITED RELIEF REQUESTED IN THE DAIMLER/CHRYSLER TOOLING MOTION. 11. The only relief requested by Daimler/Chrysler in the Daimler/Chrysler

Tooling Motion is contingent stay relief to take possession of certain machine tooling if the Debtors suffer certain types of business interruptions. See Daimler/Chrysler Tooling Motion at pp. 1112. 12. Daimler/Chrysler alleges that it owns the subject machine tooling based on

amounts Daimler/Chrysler claims to have paid to the Debtors under various purchase orders for tooling. See Daimler/Chrysler Tooling Motion at p. 7. On information and belief, GECC asserts that certain of the amounts owing by Daimler/Chrysler under the Daimler/Chrysler Prepetition Receivables are owing under the same tooling purchase orders that are identified in the Daimler/Chrysler Tooling Motion. 13. The Daimler/Chrysler Tooling Motion does not request any adjudication

regarding the amount owing by Daimler/Chrysler on account of any Daimler/Chrysler Prepetition Receivables (including any Daimler/Chrysler Prepetition Receivables owing pursuant to a tooling purchase order). The Daimler/Chrysler Tooling Motion also does not present or request any relief regarding adverse claims or defenses Daimler/Chrysler may assert to payment of any Daimler/Chrysler Prepetition Receivables (including any Daimler/Chrysler Prepetition Receivables owing pursuant to a tooling purchase order).

6
QBPHX\023718.00002\1959637.1

14.

In light of the foregoing, and in light of the pending Adversary

Proceeding, any relief the Court may consider or grant in regard to the Daimler/Chrysler Tooling Motion should not adjudicate in any way matters relating to Daimler/Chryslers obligations under the Daimler/Chrysler Prepetition Receivables (including, but not limited to, the amount Daimler/Chrysler owes under any such receivables that were generated by pre-petition tooling purchase orders, and GECCs rights in regard to the Daimler/Chrysler Prepetition Receivables). No such matters are presented in the Daimler/Chrysler Tooling Motion. All such matters already are the subject of the separately pending Adversary Proceeding. WHEREFORE, in light of the foregoing, GECC respectfully requests that: A. The Court either deny the Daimler/Chrysler Tooling Motion or limit any

relief granted as GECC has requested in this Response; and B The Court grant GECC such other and further relief as is proper under the

circumstances of these cases. DATED this 28th day of September, 2005. QUARLES & BRADY STREICH LANG, LLP

By

/s/ John J. Dawson John J. Dawson (AZ Bar #02786) John A.. Harris (AZ Bar #14459) Todd A. Burgess (AZ Bar. #19013) Renaissance One 2 North Central Avenue Phoenix, Arizona 85004 Phone: (602) 229-5200 Fax: (602) 229-5690 jdawson@quarles.com jharris@quarles.com tburgess@quarles.com

Attorneys for GENERAL ELECTRIC CAPITAL CORPORATION 7

QBPHX\023718.00002\1959637.1

CERTIFICATE OF SERVICE

A true and correct copy of the foregoing General Electric Capital Corporations Response To Daimler/Chryslers Motion For Continge nt Relief From Automatic Stay To Obtain Possession Of Tooling was served on the 28th day of September, 2005 via electronic mail and U.S. mail to the parties listed below: James A. Plemmons, Esq. Brian Martinuzzi, Esq. Dawn R. Copley, Esq. DICKINSON WRIGHT PLLC 500 Woodward Avenue, Suite 4000 Detroit, MI 48226 Attorneys for Daimler/Chrysler Corporation Email: jplemmons@dickinsonwright.com Joseph M. Fischer, Esq. CARSON FISCHER, P.L.C. 300 East Maple Road, Third Floor Birmingham, Michigan 48009 Email: jfischer@carsonfischer.com and David Eaton, Esq. KIRKLAND & ELLIS LLP 200 East Randolph Drive Chicago, Illinois 60601 Email: deaton@kirkland.com Attorneys for the Debtors Paul J. Randel, Esq. OFFICE OF THE U.S. TRUSTEE 211 West Fort Street Suite 700 Detroit, MI 48226 Email: paul.j.randel@ usdoj.gov Michael S. Stamer, Esq. AKIN, GUMP, STRAUSS, HAUER & FELD, LLP 590 Madison Avenue, 20th Floor New York, NY 10022 Attorneys for the Committee Email: mstamer@akingump.com

/s/ Lisa Cummings 8

QBPHX\023718.00002\1959637.1