General Motors’ plan to quickly sell off its most viable assets to a group of investors funded by the federal government now rests in the hands of federal bankruptcy judge Robert Gerber.
Attorneys for GM concluded three days of hearings today in Manhattan, NY by requesting that the judge approve the plan to sell assets to ‘New GM’ which will be funded by the federal government.
The request comes just one month after GM filed for bankruptcy protection.
A contingent of dissenting bondholders appearing in court today also requested that the sale be blocked. Calling the attempted sale ‘Chapter 11 nationalization,’ the group claimed it represents an attempt by the federal government to circumvent the law.
Responding to the charges, GM bankruptcy attorney Harvey Miller asserted that failure to approve the sale would result in ‘catastrophic’ consequences for GM and the auto industry as a whole.
Miller went on to say that the dissenters are asking the judge to ‘play Russian roulette’ by suggesting that GM enter into a traditional Chapter 11 reorganization instead of attempting the fast-track liquidation they now propose.
Citing June auto sales reports which showed GM losing market share to rival Ford Motor Company, Miller claimed that a protracted Chapter 11 reorganization would result in a further deterioration in the value of the assets which would ‘be felt by all stakeholders.’
In court earlier this week, Fritz Henderson and senior member of the administration’s auto task force, Harry Wilson, stated that the expedited sale is the only option if GM is to survive. Henderson also predicted that GM will not show a profit in 2009.
If the sale is approved in its current version, the U.S. Treasury will provide funding to New GM to the tune of $60 billion, which would give the U.S. Treasury (and the American taxpayers) a 60% majority stake in the company. Other stakeholders will include The United Auto Workers with 17.5%, the Canadian government with approximately 12% and GM bondholders with approximately a 10% stake in the new company.
Assuming the plan under consideration is approved, New GM will continue to operate the most viable components including Cadillac and Chevrolet. Overhead will be reduced through labor concessions, a downsized dealer network and far less debt that the current company. Unpopular and unprofitable brands and facilities would face liquidation in bankruptcy proceedings.
Judge Gerber is expected to hand down his ruling by July 10. After that date, the U.S. government has indicated that it could stop funding the automaker.