Judge Approves GM Asset Sale, Paving Way To Emerge From Bankruptcy
July 06, 2009

By Michelle Krebs

DETROIT -- A U.S. bankruptcy judge has approved General Motors' plan to sell its "good" assets to a new company and leave "bad" assets with the old one, paving the way for the automaker to emerge from bankruptcy proceedings.

Late Sunday night, Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approved the sale of substantially all of GM's to a new company to be called General Motors Company and to be funded by the U.S. Department of the Treasury.

In his ruling, Gerber wrote the sale is needed to avoid "immediate and irreparable harm" to GM.

The new GM will be headquartered in Detroit. Fritz Henderson will remain as president and chief executive officer. Recently appointed Edward E. Whitacre, Jr. will continue to serve as chairman of the board of directors. 

New Ownership

The new GM's common stock will be owned by:

- U.S. Department of the Treasury: 60.8 percent

- UAW Retiree Medical Benefits Trust (GM retiree's VEBA): 17.5 percent

-  Canada and Ontario governments: 11.7 percent

- The old GM: 10 percent

The old GM and the UAW Retiree Medical Benefits Trust will hold warrants that are exercisable for 15 percent and 2.5 percent of the interests in the new GM, respectively.

New Board

The UAW Retiree Medical Benefits Trust and the Canadian government each may nominate one member to serve on the board of the new GM.

The retiree benefits trust has selected  auto industry analyst Stephen Girsky.

Also selected to serve on the board of directors of the new GM are six current members of the General Motors Corp. board, including Erroll Davis, Neville Isdell, Kent Kresa, Philip Laskawy, Kathryn Marinello and Fritz Henderson.

The Canadian government representative and four additional board members to be identified by the U.S. Treasury will be announced at a later date, GM said in a statement.

New Name

The new company will be called the General Motors Company. It will include only the Buick, Cadillac, Chevrolet and GMC brands.

The old GM will change its name from General Motors Corporation to Motors Liquidation Company. Retained assets will be wound down or sold. Among those are: Pontiac, which will be discontinued by year-end; Hummer, which is in the process of being sold to a Chinese company; and Saturn, in the process of being sold to Penske Automotive Group. 

A new board of directors will oversee the liquidation of the old company under the supervision of the Bankruptcy Court. 

Judge Gerber's order includes a four-day stay before closing of the sale can occur. However, GM expects the sale to close in the near future. The U.S. Treasury Department had said that if the sale didn't close by July 10, it would not fund the deal. About 850 objections to the sale have been filed.

The New GM

GM said in a statement issued Monday morning that the new GM's business is expected to be immediately operational and fully competitive.Current GM employees will be offered positions by the new company. GM's subsidiaries outside the United States will be acquired by the new company and are expected to continue to operate without interruption.

"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 in the company's statement.

The automaker noted in that statement that the new GM will have lower debt 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.

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