GM urges quick approval of sale plan
NEW YORK: Facing a July 10 government funding cutoff, General Motors Corp. is calling for quick approval of its bid to sell its "good" parts into a new company and emerge from bankruptcy protection.
A bankruptcy court hearing on the sale enters its third day Thursday. On Wednesday, a GM attorney warned in closing arguments that the only option to the sale plan is the company's liquidation.
"The economics in this case don't change if this sale doesn't get approved, they just get worse," GM attorney Harvey Miller said, adding that the resulting liquidation would place the future of GM's hundreds of suppliers in danger, as well as send the U.S. into an even deeper economic crisis.
Detroit-based GM's government-backed plan for a quick exit from Chapter 11 hinges on the sale plan, which would allow the automaker to leave behind many of the costs and liabilities that have made it unprofitable.
The automaker, whose June 1 filing for bankruptcy protection was the fourth-largest in U.S. history, is hoping to avoid a lengthy sale hearing.
But hundreds of parties, including bondholders, unions, state officials, consumer groups and individuals have filed objections to the sale, threatening to hold up the process. Last month, objections from a group of bondholders and others dragged out rival Chrysler LLC's sale hearing for three days.
The GM hearing is scheduled to resume at 9 a.m. EDT Thursday. It's not clear when U.S. Judge Robert Gerber will rule.
A senior member of President Barack Obama's auto task force testified Wednesday that the U.S. government will not continue to fund GM's operations if the automaker doesn't get approval to sell its assets to a new company by July 10.
"We have no intention to further fund this company if the sale order is not entered by July 10," Harry Wilson, one of the Treasury Department officials overseeing GM's restructuring, said while being cross-examined by an attorney for a group of GM bondholders opposing the sale.
Wilson said the government decided to put in place the sale deadline, because experts agreed that GM could not survive a drawn-out restructuring process. And if the government didn't give the automaker a funding deadline, it risked funneling even more taxpayer money into GM without a guarantee of success, he said.
The task force member also said the government expects to eventually sell its 60 percent stake in the new company, and that an initial public offering of "New GM" shares would occur sometime next year.
As part of a deal brokered with the auto task force, the U.S. government will get a 60 percent stake in the new company.
The Canadian government, which has also contributed billions in aid, will get a 12.5 percent stake while the United Auto Workers union will take a 17.5 percent share to fund its health care obligations. Unsecured bondholders receive the remaining 10 percent.
Existing GM shareholders are expected to be wiped out.
The remaining pieces of the company, including some closed plants, will become the "Old GM" and be liquidated.
GM hopes to emerge as a leaner company, less burdened by debt and labor costs as it faces a severe recession that has sapped car and truck sales. Automakers have seen sales fall 37 percent over the first five months of the year.