New GM approved; goodbye liabilities

• Source: Shanghai Daily
• [10:02 July 07 2009]
• Comments

By Bree Fowler 

A bankruptcy judge said General Motors Corp can sell the bulk of its assets to a new company, potentially clearing the way for the auto maker to quickly emerge from bankruptcy protection.

United States Judge Robert Gerber said in his 95-page ruling late Sunday that the sale was in the best interests of both GM and its creditors, whom he said would otherwise get nothing.

"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 his ruling.

A spokeswoman for GM said early yesterday that the auto maker planned to release a statement soon.

The decision came after a three-day hearing that wrapped up last Thursday, during which GM and government officials urged a quick approval of the sale, saying it was needed to keep the auto maker from selling itself off piece by piece.

But attorneys for some of GM's bondholders, unions, consumer groups and individuals with lawsuits against the company argued for its rejection, saying their needs were being pushed aside in favor of the interests of GM and the government.

It was unclear early yesterday if any of those groups planed to appeal Gerber's decision.

Last month, a group of bondholders and others took their objections to Chrysler LLC's sale plan all the way to the Supreme Court, delaying its exit from bankruptcy protection.

Several consumer groups have objected to provisions in the sale that free the new company from liability for consumer claims related to incidents that occurred before GM went into bankruptcy protection.

That means that people injured by a defective GM product in connection with an incident that occurred before June 1 would have to seek compensation from the "old GM," the collection of assets leftover from the sale, where they would be less likely to receive compensation.

Morally wrong

Joanne Doroshow of the Center for Justice & Democracy said in a statement the issue "is far from over."

"It is morally reprehensible that GM will pay for injuries and deaths that occur after the bankruptcy process, but not for the hundreds of victims who have already been hurt by defective GM cars," Doroshow said.

GM's government-backed plan for a quick exit from Chapter 11 hinges on the sale, which will allow the auto maker to leave behind many of its costs and liabilities. The Treasury Department has vowed to cut off funding to GM if the sale doesn't go through by July 10.

The Detroit-based car maker's Chapter 11 filing on June 1 was the fourth-largest in US history.