With Sale of Good Assets, GM Out of Bankruptcy
General Motors completed a major step in its turnaround on Friday and closed the sale of its good assets to a new, government-backed carmaker, at a speed unimagined by auto and bankruptcy experts even six months ago.
The government and G.M. signed the documents at 6:30 a.m. at the offices of Weil, Gotshal & Manges, the company’s chief bankruptcy counsel, according to a person briefed on the matter, after a bankruptcy court order staying the sale for four days expired on Thursday. G.M. will hold a news conference in Detroit, hosted by its chief executive, Fritz Henderson, and its new chairman, Edward E. Whitacre Jr., later Friday morning.
G.M.’s sale of its desirable assets, including brands like Chevrolet, Cadillac and GMC, to the new company — now named Vehicle Acquisition Company but soon to be renamed the General Motors Company — is meant to shed decades of buckling liabilities. The federal government will hold nearly 61 percent of the new company, with the Canadian government, a health care trust for the United Auto Workers union and bondholders owning the balance.
The new company will be much smaller, with brands like Saturn, Hummer, Opel and Pontiac in the process of being sold or closed. It will also have a smaller sales network, with thousands of dealers having been cut during the reorganization.
When G.M. filed for Chapter 11 on June 1, a humbling moment for the once-dominant carmaker, President Obama promised that the reorganization would be quick and controlled. Indeed, throughout its court proceedings in Lower Manhattan, lawyers, G.M. executives and the administration argued that speed was vital. (The administration initially cautioned that the reorganization might take as long as 90 days.)
The only alternative to the sale plan, they said, was liquidation, a prospect that they argued would send shock waves throughout the economy and leave G.M.’s creditors with nothing.
Unlike Chrysler, whose reorganization included a challenge by three Indiana state funds that rose to the Supreme Court, G.M. has not faced an opponent with enough clout to derail its sale. It faced objections from dissident retail bondholders, who held a fraction of G.M.’s $27 billion in bonds, as well as from accident victim litigants, asbestos claimholders and some retirees whose claims would be largely wiped out.
But none of the protests rose higher than Federal District Court, where bankruptcy court rulings are initially appealed. And in the decision approving G.M.’s sale, Judge Robert E. Gerber of Federal Bankruptcy Court said that his ruling relied in part on the precedents set by Chrysler’s bankruptcy case a month earlier.
With the closing of the sale, the hard part for G.M. is only beginning.
Senior administration officials have promised that they will not “micromanage” the company, despite being the majority owner and having already picked new directors, including Mr. Whitacre, the former chairman and chief executive of AT&T. By the end of the year, the government will have poured $50 billion of taxpayer money into the automaker.
The administration hopes to take the new G.M. public again next year.
“We are here to get the government out of the auto business,” Steven Rattner, the head of the government’s auto task force, told reporters this week.
But until that point — and beyond — the new G.M. must grapple with swooning car sales. New auto purchases are down 37 percent this year, with the seasonally adjusted annual rate now standing at 9.91 million vehicles, still below what the American carmakers need to break even. Mr. Henderson, G.M.’s chief executive, testified in court that he does not expect his company to turn a profit this year.
G.M. must also learn to exist as a much less dominant player. For the first six months, it held less than 20 percent of the market, far from the 50 percent it commanded decades ago. Rivals from Toyota to Hyundai to even Ford, which has sought to restructure its finances outside of bankruptcy, have all gained market share.