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Judge Denies GM Retirees' Request For Committee

Associated Press|judge, gm, auto, autmotive, bailout
Thursday, 25 Jun 2009 | 3:28 PM ET

A bankruptcy judge on Thursday ruled that a group representing General Motors salaried retirees cannot form a formal committee to negotiate with the automaker as it attempts to reorganize and emerge from Chapter 11 as a new company.

U.S. Judge Robert Gerber said that since GM had the right to modify or terminate the retirees' health care and life insurance benefits before they filed for bankruptcy protection, the retirees can't challenge the automaker's ability to do so now.

"While I do understand the importance of this to the retirees, I can't grant the retirees rights that they don't have outside of bankruptcy,"Gerber said in issuing his ruling.

As part of its restructuring plan, GM plans to continue to pay health care and life insurance benefits for its 122,000 salaried retirees and their surviving spouses, but those benefits are expected to be reduced and the retirees will be forced to shoulder a larger share of their
health care costs.

Retired hourly workers whose benefits are dictated by contracts with unions like the United Auto Workers are not affected.

Neil Goteiner, an attorney for the salaried retirees group, said that given what's at stake for the retirees, the cost of a committee was warranted.

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General Motors logo


"Your honor, this is truly a situation where you're dealing with widows and orphans," Goteiner said. "It's grossly unfair. They should get a chance to sit down and at least be the assistant captain of their fate."

But GM attorney Harvey Miller argued that the retirees shouldn't be able to form a committee since GM has always had the right to modify salaried retiree benefits and has done so in the past.

"There can still be discussions with GM and there is a group that periodically has had discussions with GM," Miller said. "This would simply add more costs."


Miller added that the formation of a committee could threaten to slow down the sale of GM's assets to a new company. The sale needs to go through as soon as possible if the company is to have any chance of success, he said.

As part of its plan to emerge from court protection, GM plans to sell the bulk of its assets to a new company that would be controlled by the U.S. government.

In exchange for up to $50 billion dollars in financing, the U.S. government will take a 60 percent ownership stake in the new company.The Canadian government would get 12.5 percent.

The United Auto Workers union will get 17.5 percent, which it will use to fund its retiree health care obligations, while GM's unsecured bondholders would own the remaining 10 percent.

Earlier in Thursday's hearing, Gerber gave GM final approval to access to its full $33.3 billion in bankruptcy financing. He had given preliminary approval earlier this month for GM to use $15 billion of the total.

The billions in U.S. and Canadian government financing is intended to keep the automaker going until it can emerge from Chapter 11.

Also on Thursday, Gerber denied a request from an unofficial committee of people with asbestos-related claims against GM to appoint a "tort czar" that would oversee all future claims against the old GM, not just those related to asbestos.

The asbestos group had previously filed a motion requesting formal committee status, but told the court Thursday that it was no longer pursuing that. The group has one representative on the case's unsecured creditors committee.

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