US bankruptcy judge approves GM restructuring plan
- Source: Global Times
- [08:31 July 07 2009]
- Comments
General Motors won approval from a bankruptcy judge late Sunday to sell its best assets to a new carmaker in which the US government will hold a majority stake.
The decision paves the way for a speedy exit for GM, which sought bankruptcy protection on June 1 and has vowed to reinvent itself as a significantly smaller carmaker with fewer brands, tens of thousands fewer employees, and a diminished global footprint.
Judge Robert Gerber said he had examined about 850 objections to the restructuring plan raised by GM bondholders and others, but found there were “no realistic alternatives” to the asset sale.
“As nobody can seriously dispute, the only alternative to an immediate sale is liquidation - a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates,” Gerber wrote in a 95-page opinion.
Judge Gerber’s decision can still be appealed by GM’s creditors and it will take several days or possibly a few weeks for the asset sale to be completed.
That will nonetheless be well ahead of the 60- to 90-day timeframe predicted by President Barack Obama’s administration, which spearheaded the process and warned that it would withdraw funding if the sale was not approved by July 10.
Like Chrysler, GM’s weaker assets will be liquidated through the New York bankruptcy court, but the new GM will not be burdened by the lengthy process.
The US government will own 60.8 percent of the new company after having supported GM’s operations with some $50 billion in emergency loans.
Canada, which provided $9.1 billion in loans, will have an 11.7 percent stake and a United Auto Workers union retiree healthcare trust fund will hold 17.5 percent.
The “Old GM” will retain a 10 percent stake, allowing creditors to recover some losses.
Obama’s administration has said there was no intention of nationalizing GM over the long term and will not be participating in its daily operations. The government could begin to sell its stake as early as 2010, once the new company is ready to launch a public stock offering.
While the new GM will have a significantly stronger balance sheet after having slashed its labor costs and shuttered factories to rid itself of excess capacity, it must still contend with the collapse in auto sales, which pushed it into court protection in the first place.
AFP