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Exiting bankruptcy quickly to allow maker to receive continued Treasury funds
Published on Tuesday, Jul 07, 2009
Associated Press
NEW YORK: General Motors will sell the bulk of its assets to a newly created company, potentially clearing the way for the automaker to quickly emerge from bankruptcy protection.
U.S. Judge Robert Gerber said in a 95-page ruling late Sunday that the sale was in the best interests of both GM and creditors, whom he said would otherwise get nothing.
GM's government-backed plan for a quick exit from Chapter 11 hinges on the sale, which will allow the automaker to leave behind many of its costs and liabilities. The Treasury Department has vowed to cut off funding to GM if the sale doesn't go through by Friday.
The ''old GM,'' which will be known as Motors Liquidation Co., will include a smattering of properties, several of which are facilities already slated to be closed. They will be sold to the highest bidder under court supervision.
Other assets to be filed under the old GM include brands like Hummer, Saturn and Saab, for which GM has lined up buyers. They also include all current GM common stock, which — despite its active trading on over-the-counter markets — will soon be worthless.
Upcoming small-car models such as the Chevy Cruze, to be built in Lordstown, and the Spark might fare well, but will face heavy competition from foreign automakers.
Overall, GM's major challenge will be winning back customers who have migrated to foreign competitors. The company is expected to receive $50 billion in taxpayer funds. GM received nearly $20 billion in taxpayer funds before its bankruptcy.
In exchange for those funds, the government will own about 61 percent of the ''new GM.'' The Obama administration has said it does not plan to interfere with the day-to-day running of the company, though the government has been involved in the selection of the new company's 13-member board of directors and change of control transactions.
The United Auto Workers union gets a 17.5 percent stake through its health-care trust for retirees and has selected Stephen Girsky, a former GM adviser and Morgan Stanley analyst, to serve on the board. The Canadian government, which will control an 11.7 percent share, also will pick one member.
The old GM will remain an entity until all of the facilities are sold off, a process that could take months or years to complete. The government has said it plans to provide about $1.18 billion to fund the wind-down process.
Get the full article here.
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