GM sale cleared, path opens to exit Chapter 11
By TOM KRISHER
DETROIT
The path is now clear for General Motors Corp. to leave bankruptcy protection
in record time as a leaner company that is better equipped to compete in a
brutal global auto market.
On Thursday, a judge's order allowing GM to sell most of its assets to a new
company went into effect, despite a last-minute appeal by plaintiffs in a
product liability case.
GM spokeswoman Julie Gibson said U.S. Bankruptcy Judge Robert Gerber's order
became effective at 12 p.m. EDT. GM lawyers are working on paperwork to close
the sale as quickly as possible, after which GM would leave bankruptcy
protection.
GM CEO Fritz Henderson will hold a news conference in Detroit Friday morning
to explain executive cuts, management changes and the company's plan to make
money by emphasizing quality and fuel economy. He will be joined by Edward
Whitacre Jr., who will lead the board of GM.
Once the world's largest and most powerful automaker, the "new GM" will
become government-owned, but leaner and greener, cleansed of debts and
burdensome contracts that nearly dragged it into liquidation. But the new
company faces tough international competition and the worst auto sales market in
more than 25 years.
John Pottow, a University of Michigan Law School professor who specializes in
bankruptcy, said opponents of the sale had little legal recourse to block it
because their issues were shot down by higher courts in Chrysler's bankruptcy
case.
"It's done," Pottow said. "I knew they were dead as soon as the Chrysler case
was decided."
He expects GM to close the deal and emerge from bankruptcy on Thursday in 39
days, a record for a company its size, he said.
GM spokesman Tom Wilkinson said he could not give a time frame for when the
sale will close.
After clearing bankruptcy court, the new GM will focus only on four core
brands, Chevrolet, Cadillac, Buick and GMC. The company is in the process of
selling Saturn, Saab, Hummer and its Adam Opel GmbH unit in Europe, and it will
discontinue Pontiac by the end of the year.
GM would not have been able to clear bankruptcy court at such a high speed
without help from its crosstown rival Chrysler Group LLC, which exited
bankruptcy on June 10 after 42 days.
Pottow said Chrysler's case set favorable legal precedents in previously
uncharted territory of bankruptcy law.
The U.S. government, which will wind up loaning GM up to $50 billion to save
its roughly 88,000 U.S. jobs, also played a significant role through the
Treasury Department's auto task force, Pottow said.
"It's amazing what you can do when you have a government task force convened
to help your company," he said.
The government provided bankruptcy financing, and the task force served the
role of management consultant, telling GM that its early restructuring plans
were too rosy and demanding further cuts, he said.
The parts of the company not moving over to the new company will become part
of "old GM," a collection of assets and liabilities that will be liquidated over
the next few years and sold off to pay the company's various creditors including
people with pending lawsuits.
The assets range from the expected things, such as closed plants and other
facilities, to more quirky items including a golf course in New Jersey and a
church in Indiana.
The government has pledged $1.18 billion to help fund the wind down.
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AP Auto Writer Bree Fowler in New York contributed to this
report.