Judge Approves Sale of GM Assets

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It looks like I am being proven wrong on this one. I was of the view that the GM bankruptcy could get bogged down in court, since it had many more parties who could protest the use of section 363 to expedite asset sales than Chrysler did, some of whom also appeared to have better arguments.

Now it was a given that the company would jurisdiction-shop and pick a favorable venue. so the progress so far isn’t completely unanticipated. But I had also assumed that the unhappy creditors would also look for friendly judges, and at least some of them would be successful enough to throw some sand in the gears. That does not appear to be happening.

From Reuters:

A U.S. judge on Sunday approved General Motors Corp’s bankruptcy sale, in a move that will allow the company’s most profitable assets to exit bankruptcy protection under government ownership….

Under the deal, New GM will operate the best parts of the old company, including its Chevrolet and Cadillac brands, with a less-expensive workforce, smaller dealer network, and much less debt.

The “old GM,” which includes unpopular brands and unneeded factories and liabilities, will remain behind in bankruptcy court to be liquidated.

The U.S. Treasury has agreed to provide $60 billion in financing to the new company, including a proposed $50 billion that would give the U.S. Treasury a 60 percent stake in the company.

The UAW would gain a 17.5 percent stake, the Canadian government would own about 12 percent, and GM bondholders would be expected to obtain about 10 percent of the new company.

At a three-day sale hearing that concluded July 2, some small bondholders had objected to the deal, but no other bidders presented an alternative, and the 100-year-old automaker warned of “catastrophic” consequences to the auto industry if the sale was blocked.

A successful sale of GM’s main assets is the second big victory for the Obama administration’s auto task force. It helped broker the sale of Chrysler LLC to a group led by Italy’s Fiat SpA last month.

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  1. Alan

    It looks like I am being proven wrong on this one. I was of the view that the GM bankruptcy could get bogged down in court

    In what sense? The New Chrysler's operating results are already falling below the greatly diminished projections. And serious questions are already appearing about the New Chrysler's staying power under such scenarios.

    In the very narrow sense, yes, some will say "you were wrong". A pro forma process was rammed through. That's because the Obama cabal was able to blackmail the lower court judges by threatening to terminate bankruptcy financing, the US Government being the lender of only resort. Were any other lenders ever in such a position to dictate terms to a bankruptcy court?

    The real litmus test for a successful Chapter 11 restructuring and exit remains the emergence of viable companies. The additional criterion here are companies weaned off the public teat. In this sense we've only gotten an off-Broadway performance of Stress Testing to date.

    And if Chrysler, GM, Ford or all three reenter bankruptcy late this year or next for any reason were you still wrong?

    The early Roosevelt Administration racked up a series of similar rapid fire public relations stunts it called "successes". Shortly before most of the NRA was found unconstititional.

  2. Alan

    The Lear Corporation just filed for Chapter 11, listing debts of 4 billion and assets of 1 billion.

    The question remains how fast track Chapter 11 "successes" like GM and Chrysler can return to profitability when their underlying supplier network continues to collapse.

    In this instance perhaps consumers will adapt to buying vehicles with no seats? This might offset the estimated $1,500 per vehicle sticker increase that will be imposed by Obama's new fleet mileage standards. A zero sum offset like this might work. Especially since the political establishment regards falling average consumer incomes and net worth as desirable.

    "Green shoots." "Green jobs". "Recovery". "Growth". "Four legs good two legs bad". "2+2 =5" "Big Brother Is Always Right."

  3. Erick

    What percentage of auto-bailout supporters actually own or would consider buying a GM or Chrysler?

  4. Yves Smith

    I have never owned a car and intend to keep it that way. My mother and one of my brothers own GMs and seem happy with them. My brother does live in the Upper Peninsula of Michigan, where a heavy car is a plus (snow on ground December-May).

    If I were forced to own a car, it would probably be a Smart car, which is a toy masquerading as a car.

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