GM mounts final push in court for restructuring plan

Washington Post

NEW YORK — General Motors mounted a final push for its historic restructuring plan, arguing before a federal bankruptcy judge that the U.S. government would cut off funding — in effect risking liquidation of the automaker — unless it won quick approval for the turnaround proposal.

The government has “no intention to further fund this company if the sale order is not entered by July 10,” said Harry Wilson, a member of the Obama administration’s auto task force who oversaw the government’s day-to-day dealings with GM.

Wilson’s testimony came during the second day of hearings on a request to approve the sale of the automaker’s assets to a “new” GM that would be 61 percent owned by the U.S. government.

Wilson told the court that he expected an initial public offering of the new GM’s stock in 2010. That would allow the Obama administration, which has said it does not want to run private companies, to sell its GM stake.

In closing arguments, attorneys for GM, and the governments of the United States and Canada, which has also provided funding, urged Judge Robert Gerber to approve the sale quickly. Speed, they said, was of the essence, because GM’s assets — as well as consumer confidence — are fragile.

Under the proposed agreement, the government can walk away if the judge does not approve the deal by July 10 or if the sale is not completed by Aug. 15.

According to a source familiar with the matter, GM and the Treasury Department’s auto task force are aiming to close the sale Tuesday. That would mean GM would emerge from bankruptcy 37 days after seeking court protection, or five days faster than Chrysler managed the same feat.

Unlike the Chrysler case, GM has faced no major threat to its sale, in part because the legal path for the type of speedy bankruptcy being sought had been tested by Chrysler.

Despite the more than 700 objections that have been filed by bondholders, unions and other GM stakeholders, no one has seriously questioned the fundamental merits of the government-orchestrated plan to revitalize the largest U.S. automaker, attorneys for GM and the federal government said during closing arguments. Under the proposed sale, GM would sell its profitable assets to the new GM. Left behind in bankruptcy with the “old” GM would be liabilities and assets that would be a drag on the new, leaner company, they said.

“No party has come forward with another source of financing or proposed higher value for assets to be sold,” said bankruptcy lawyer Harvey Miller, who is representing GM.

The objectors, Miller said, largely want more money, or more time to gain negotiating leverage.

Aside from the precedent set by Chrysler, there are several factors contributing to the GM’s fast trip through bankruptcy proceedings so far.

Last week, the Treasury Department struck a deal with a number of state attorneys general who had objected to the sale of GM assets “free and clear” of liens, removing a potential hurdle.

Under the plan, the new GM would assume responsibility for claims arising from accidents that occur after the sales transaction, even if they involve GM vehicles made before the sale of the company. GM also faced no court objections from dealers it is seeking to shed.