Judge OKs Plan to Sell GM Assets; Appeal Looms
Late Sunday, U.S. Bankruptcy Court Judge Robert Gerber said
in a 95-page ruling that GM’s sale was in the best interests of both itself 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,” he wrote in his ruling.
But the ruling is likely to be appealed. A Chicago law firm
representing people who have sued GM in several car wreck cases filed paperwork
Monday saying it would appeal to U.S. District Court in New York.
Gerber said the sale was GM’s only option and that
completing it would “prevent the death of the patient on the operating
table.” He approved the sale just over one month after GM filed for
bankruptcy, in the largest U.S. manufacturing bankruptcy in history.
Under the deal brokered by the Obama administration,
“New GM” will emerge as a more streamlined automaker operating the
best parts of the old company, including its Chevrolet and Cadillac brands,
with a cheaper workforce, smaller dealer network and much less debt. “Old
GM,” which includes less-popular brands and unneeded factories and
liabilities, will remain behind in bankruptcy court to be liquidated.
“The U.S. Treasury, in making hard decisions about
where to spend its money and make New GM as viable as possible, made business
decisions that it was entitled to make,” Gerber wrote.
Gerber issued a four-day stay of the order approving the
sale, which should allow it to close as early as Thursday. Such stays are
typical and allow for possible appeals.
The sale marks the second big victory for the Obama
administration’s auto task force. It helped broker the disposal of Chrysler LLC
to a group led by Italy’s Fiat last month.
The ruling comes after a three-day hearing that wrapped up
Thursday, during which GM and government officials urged a quick approval of
the sale, saying it was needed to keep the automaker from selling itself off
piece by piece.
“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,” GM President and CEO Fritz Henderson
said in a statement Monday. “Now it’s our responsibility to fix this
business and place the company on a clear path to success without delay.”
But attorneys for some of GM’s bondholders, unions, consumer
groups and individuals with lawsuits against the company argued for its
rejection, saying that their needs were being pushed aside in favor of the
interests of GM and the government.
Lawyers for five “individual accident litigants”
filed a notice of appeal with the bankruptcy court Monday that gave no grounds
or details. The deadline to appeal is noon Thursday, after which point Gerber’s
order takes effect and the sale is free to close.
Last month, a group of bondholders and others took their
objections to Chrysler’s sale plan all the way to the Supreme Court, delaying
the automaker’s 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.
GM’s government-backed plan for a quick exit from Chapter 11
hinges on the sale, which will allow the automaker 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 automaker’s Chapter 11 filing on June 1 was the
fourth-largest in U.S. history.