Tuesday June 30, 09:34 PM
GM seeks approval to exit bankruptcy as a new company
By Amandine Ambregni
NEW YORK (AFP) - General Motors (NYSE: GM - news) sought approval from a bankruptcy court Tuesday to sell off its best assets to a new, smaller company unburdened by old debts and supported by billions in government loans.
Judge Robert Gerber plowed through a host of motions linked to GM's plan to emerge from bankruptcy as a leaner, more focused automaker, cutting some arguments off with "please do not duplicate other objections."
He became frustrated in the afternoon, warning the "hundreds of lawyers here" that while "I'm gonna keep my cool" he expected "questioning more focused on what is important."
"People seem to have forgotten why we are here, what we're trying to achieve," Gerber told the crowded courtroom.
GM chief executive officer Fritz Henderson was peppered with questions by lawyers representing creditors about the automaker's financial problems prior to bankruptcy, the government bailout and how the new company will be structured financially.
He stuck largely to the line of defense presented by GM's lawyers: bankruptcy was the "only viable solution" to avoid liquidating the largest US automaker.
Henderson also confirmed that former chief executive officer Rick Wagoner's departure in March was at the behest of the Treasury Department.
Should Gerber dismiss the 850 objections mounted by creditors and grant GM the green light, creditors are given the right to appeal.
But the precedent established by Chrysler (Xetra: 710000 - news) 's rapid-fire bankruptcy makes it unlikely they will succeed in blocking the automaker's swift emergence.
GM, which filed for bankruptcy protection on June 1 after reaching agreements with its main union and the bulk of its major creditors, is said to be planning to launch the new company in mid July.
That would be well ahead of the 60 to 90 day timeframe predicted by President Barack Obama's administration, which spearheaded the process.
Chrysler, which is about a third of the size, spent 40 days in bankruptcy protection and even an appeal to the Supreme Court did not block its sale to a new company run by Italy's Fiat (Milan: F.MI - news) .
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 capital in exchange for some 50 billion dollars in emergency loans, Canada will have 11.7 percent and a United Auto Workers retiree health care trust fund will hold 17.5 percent.
Creditors holding GM bonds will swap 27.1 billion dollars in debt for a 10-percent stake and warrants allowing them to buy an additional 15-percent stake.
Officials said the Obama administration has no intention of nationalizing General Motors over the long term and will not be participating in its day-to-day operations.
While the hearing could take several days given the number of complaints filed, most observers consider it a mere formality as the plan's approval is expected to be assured.
Judge Gerber has not yet ruled against GM on a single motion and has shown his desire for a speedy process from the beginning.
"There's no suspense at all!" said one legal source who has followed the case but is not participating.
"It's like judge Gerber doesn't want the case to face the same difficulties Chrysler had."
Significant objections remain, however, from a group of dealers GM plans to eliminate from its network.
The IUE-CWA union has also mounted objections to the plan which will cut the health benefits of its 41,000 retired members.
While the United Autoworkers union (UAW), which represents the bulk of GM's workforce, managed to reach a deal to protect retiree benefits by setting up a trust funded with both cash and stock in the new GM, the automaker's smaller unions were not offered the same deal.
About 30 union members protested outside the court carrying signs which demanded "justice for middle class."
Gerber could order GM to modify its plan to meet some of the objections or the automaker could reach a deal outside of court in order to speed up the process.
GM agreed last week to accept liability for past product defects amid mounting political pressure.
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