Proposed Sale of Friendly Ford Delayed

SANTA ANA â€”  The proposed sale of troubled Friendly Ford was delayed Friday amid objections in federal bankruptcy court here that the $1.2-million price is too low and that thousands of car buyers who purchased extended warranties might be left unprotected.

U.S. Bankruptcy Judge John Ryan scheduled a new hearing for Thursday to take additional testimony and to consider any new bids that might materialize for the high-volume Huntington Beach dealership.

Friendly, which operated as Wilson Ford until last August, filed in April for protection from creditors under Chapter 11 of the federal bankruptcy code. The filing was made three days after the state attorney general’s office filed a $3-million civil fraud suit against the dealership and several of its current and former principals and executives.

Attorneys for several of the Huntington Beach dealership’s major creditors objected Friday to the purchase of Friendly’s major assets by Encino luxury car dealer Terry York because they fear there would not be enough proceeds to repay what they claim they are owed.

York had originally agreed to pay almost $1.8 million, but the price has been slashed, largely because of the negative impact the fraud suit has had on Friendly’s reputation and sales.

A new issue that surfaced Friday is the situation of about 6,000 customers who purchased extended warranties from Friendly.

The dealership is refusing, because of its bankruptcy status, to provide service under the warranties, many of which require that the repair work be done only at Friendly.

The purchase agreement with York absolves him of any responsibility to honor the warranties should he take over the dealership.

Ironically, many of the warranties sold by what was then Wilson Ford were marketed by First Extended Service Corp. in Dallas--a company owned by Texas auto dealer Carl Wescott, a former major shareholder of Wilson.

An attorney for First Extended said the only current recourse for extended warranty holders is to submit a claim to First Extended or its insurer.

Wescott is one of several defendants named in the state’s consumer fraud suit.

Among other things, the suit alleges that Friendly, under that name and as Wilson Ford, used fraudulent sales techniques to pressure customers into buying the extended warranties at inflated prices, often for several thousand dollars. Even at an average of $1,000 each, the 6,000 warranties would have brought in a gross income of $6 million.