A US federal bankruptcy judge will decide the immediate fate of General Motors’ effort to quickly sell its best assets to a group funded by the US government, after a three-day court hearing that concluded yesterday.
The iconic manufacturer wrapped up the final day of its sale hearing in US bankruptcy court in Manhattan by asking Judge Robert Gerber for approval to sell its best assets to a “New GM” funded by the US government.
GM is seeking approval for the sale just one month after filing for bankruptcy protection. Judge Gerber asked GM’s attorneys to submit papers to him by Friday and is expected to rule before July 10, the date after which the government has said it could stop funding GM.
In court on Thursday, a group of dissenting bondholders urged Judge Gerber to block the sale, calling it the first attempt at “Chapter 11 nationalisation” and arguing the government was trying to circumvent the law.
However, GM’s lead bankruptcy attorney, Harvey Miller of law firm Weil, Gotshal & Manges, told Judge Gerber that anything but approval of the sale would have “catastrophic” and “irreversible” consequences for GM and the auto industry.
“The objectors are asking your honour to play Russian roulette,” Mr Miller told Judge Gerber, in response to claims from the bondholder group that GM could pursue a more traditional Chapter 11 reorganisation plan rather than a fast track sale.
“These are assets that will deteriorate in value, and that deterioration will be felt by all stakeholders,” Mr Miller said, noting that June vehicle sales this week showed GM was losing market share to Ford.
This week GM’s chief executive, Fritz Henderson, and Harry Wilson, a senior member of the Obama administration’s autos task force, told the court the sale was GM’s only option for survival. Mr Henderson said he did not expect GM to make money in 2009.
If the deal were approved, “New GM” plans to operate the best parts of the old company, such as Chevrolet and Cadillac, with a less-expensive workforce, smaller dealer network, and much less debt.
The “old GM,” which would include unpopular brands and unneeded factories and liabilities, would be liquidated in bankruptcy court.