GM sale gets OK from bankruptcy judge
07 07 09 - 15:55 GM sale gets OK from bankruptcy judgeAEN News
(NYSE: GM) General Motors was given approval by bankruptcy judge Robert Gerber on Sunday to sell its assets to a new government-backed automaker.
GM, formerly the largest U.S. auto company is currently undergoing bankruptcy reorganization during the worst recession ever recorded in the United States since the Great Depression. The Obama administration plans include a major restructuring of the auto industry in order to rebuild a more fuel efficient economy not dependent on foreign oil.
Judge Gerber sided with government lawyers in a 95-page ruling he issued following three days of heated debate from as many as 850 parties. He decided that it was in the best interests of GM to accept an asset sale to the newly formed automaker. A diverse and apparently unprepared group of dissident bondholders, union retirees, and others voiced their objections over three days of hearings. The ruling was a critical step in forming the "new GM" that will release the new company of its former debt, too many house brands, and dealerships. The deal is expected to close by the end of the week allowing the new entity to emerge.
A statement from the company read as follows...
"The new GM will have lower leverage and a stronger balance sheet, which when combined with a lower break-even point, will allow it to reduce its risk, operate profitably at much lower volume levels, and to reinvest in the business in the key areas of advanced technology and product development. GM’s subsidiaries outside the United States will be acquired by the new company and are expected to continue to operate without interruption."
The ruling is a success for the Obama administration despite the huge and complex nature of GM now operating on $19 billion in government loans.
Once the sale is done and the new company is established, an additional $30 billion in government funding will be available and dedicated to advancing fuel efficiencies, hybrids/plugins, the production of much greener vehicles and hopefully long term viability and a brighter future.
The new GM will be 60 percent owned by the US Treasury, UAW would get a 17.5 percent stake, the Canadian government about 12 percent and GM bondholders about 10 percent. The judge issued a 4 day stay until the sale can be closed and thus is likely to happen by the end of this week.
The administration's belief that rebuilding the auto industry from the ground up was in the best interests of the country and the only way of saving the company.
"Liquidation would be disasterous for the Company," wrote Judge Gerber. "It would affect GM's suppliers, GM's employees and the communities. If sold, the creditors now trying to increase their incremental recoveries would get nothing."
General Motors' CEO Fritz Henderson is working with the administration and hopes to complete the asset sale within a few days.
“A healthy domestic auto industry remains vital to the global economy and we deeply appreciate the support the U.S., Canadian and Ontario governments and taxpayers have given GM, and the sacrifices that have been made by so many. This has been an especially challenging period, and we’ve had to make very difficult decisions to address some of the issues that have plagued our business for decades. Now it’s our responsibility to fix this business and place the company on a clear path to success without delay,” said Henderson.
The new company will be called NGMCO, Inc., and an IPO is expected in 2010 along with the Volt.
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