GM Awaits Judge's Ruling on Asset Sale Plan
An attorney for General Motors urged a bankruptcy judge Thursday to approve the automaker's sale plan, saying that the only other alternative would be a liquidation of the company's assets that would have "horrific" consequences for everyone.
Attorney Harvey Miller said the government appears committed to cutting off funding to GM if the sale is not approved by July 10. Some parties objecting to the sale argued in court that the Obama Administration won't allow GM to fail.
"Essentially the objectors are asking you to play Russian roulette," Miller said, adding that ignoring the deadline would put the futures of GM's employees, retirees, and creditors all at risk.
Closing arguments in the three-day hearing ended early Thursday afternoon. Court was set to resume after a lunch break. It's not known when Judge Gerber will rule.
GM's government-backed plan for a quick exit from Chapter 11 protection hinges on the sale of most of its assets to a new entity, allowing the automaker to leave behind many of the costs and liabilities that have made it unprofitable. The Detroit car maker's June 1 filing for bankruptcy protection was the fourth-largest in U.S. history.
Harry Wilson, a member of President Barack Obama's automotive task force, testified Wednesday that the government has no plans to continue funding GM past July 10 if the sale is not approved by then. Wilson said a quick sale is needed, because the government cannot keep sinking billions in tax dollars into the company for an open-ended period of time with no guarantee of success.
As part of a deal brokered with the auto task force, the U.S. government will get a 60 percent stake in the new company in exchange for what's expected to eventually total nearly $50 billion in aid.
Earlier, Michael Richman, an attorney for a trio of bondholders opposed to GM's plan told U.S. Judge Robert Gerber to "call the government's bluff" and require GM to restructure itself through a more traditional Chapter 11 process instead of through the quick sale of its assets.
Richman said that while the company may be powerless to fight the government's demands, the court can "push back" to protect the interests of all the company's stakeholders.
"The court should draw the line and say that this transaction goes to far," Richman said. "This sends a powerful message that even in the bankruptcy courts of the country's commercial capital there are limits and that rights and due process are not to be sacrificed."
Hundreds of parties, including bondholders, unions, state officials, consumer groups and individuals, have filed objections to the sale, threatening to hold up the process.
Last month, numerous objections also dragged out rival Chrysler's sale hearing for three days before it was approved by the bankruptcy judge in that case. A group of the automaker's bondholders and consumer groups also appealed the sale all the way to the Supreme Court before it ultimately went through and the automaker emerged from court oversight as a new company.
Richman argued Thursday that a traditional or accelerated restructuring of GM under Chapter 11 could still allow the automaker to meet its goal of emerging from court oversight in less than 90 days, but give everyone, including the bondholders, a fair chance to negotiate with the company.
The trio of bondholders Richman represents hold just a fraction of GM's unsecured debt. One of the members bought his bonds for just 2 cents on the dollar, while the other two spent no more than 20 cents on the dollar for theirs.
The Canadian government, which has also contributed billions in aid, will get a 12.5 percent stake while the United Auto Workers union will take a 17.5 percent share to fund its health care obligations. Unsecured bondholders receive the remaining 10 percent.
Existing GM shareholders are expected to be wiped out. The remaining pieces of the company, including some closed plants, will become the "Old GM" and will be liquidated.
GM hopes to emerge as a leaner company, less burdened by debt and labor costs as it faces a severe recession that has sapped car and truck sales. Automakers have seen sales tumble in the first half of this year.