BREAKING: Bankruptcy Judge OKs sale of good assets to New GM
by Chris Shunk on Jul 6th 2009 at 2:07AM 
General Motors has cleared a major hurdle to get out of bankruptcy quickly, as U.S. Judge Robert Gerbe has finally given the automaker the go-ahead to sell off its best assets to a newly formed company that analysts have been calling "New GM". The new GM will include assets like the Chevrolet and Cadillac brands, plus plants and production facilities that haven't scheduled for closure. The old GM will consist of soon-to-be shuttered plants, the Pontiac brand and mountains of debt and liabilities.
Judge Gerbe gave the go-ahead on Sunday because he felt not doing so would cause "immediate and irreparable harm" to the 100-year-old company. The Detroit Free Press is reporting that the Treasury Department was threatening to cut off funding to GM if the sale didn't go through by July 10. Hundreds of GM's debtors requested that the sale be rejected, but Judge Gerbe's ruling likely means that the affected parties won't see much, if any money owed.
GM entered Chapter 11 bankruptcy protection on June 1, and if New GM actually does emerge from bankruptcy this week, the fourth largest bankruptcy in this country's history will have been completed inside of just six weeks. The timeframe is very similar to that of the much smaller Chrysler, which needed only 42 days to exit bankruptcy.
[Source: Detroit Free Press, Photo by Hiroko Masuike/Getty]
Reader Comments (Page 1 of 2)
why not the LS2LS7? 2:22AM (7/06/2009)
I just don't think this was handled all that well. It'll be advantageous for GM, but everyone else (including the taxpayer) takes a huge soaking.
I'm no expert at bankruptcy, but I find it hard to believe it had to be this way.
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jpm100 7:50AM (7/06/2009)
Bankruptcy screws many people out of what they are owed.
Chapter 11 Bankruptcy requires funding. It costs money to execute a bankruptcy and have the company stay in tact. GM couldn't get money threw private methods or they wouldn't have gone to the government in the first place.
So this went down just like bankruptcy would have. The only irregularities were 1) the degree to which the UAW retirees were protected and 2) the government ending up with stock instead of loan IOUs. And given who is president, it wasn't hard to predict to predict #1 or #2 for that matter.
I believe Chapter 11 bankruptcy impacts were misrepresented to the public by many people. Even so far as some of the same people who advocated bankruptcy for the auto companies now beat them with fact they are in bankruptcy.
DayShifter 11:00AM (7/06/2009)
Wasn't one of the nicknames for bankruptcy... "welfare program" for the rich. No doubt, the whole system is screwed.
Mr.Oak 10:45AM (7/06/2009)
jpm100: There I was, merrily reading along your critique, then came to the harsh realization that you don't know the difference between "Through" and "Threw". The bottom fell out, now you have no point.
Look, I slammed GWB really hard during his presidency, why? because it painfully obvious that he was dumber than a bag of bricks, was unqualified for the job (as was clearly evident by his NUMEROUS failures). On Mr. Obama, while you may not like his methods, it is quite clear that his administration is magnitudes more effective than the one that he replaced.
The only thing I ask of you critics, is to KNOW the entire argument before passing judgement. The talking heads who two weeks ago, were unwilling to credit any of the president's policies for the turn around in the stock market, were quite happy to blame his policies for the past week's tumble.
BTW: John McCain in my opinion, would have only been a MILD upgrade from GWB. John's biggest problem is that he lets the train out of the station, not knowing the destination. He panics, makes rash decisions then pauses and scratches his head.
Good luck to GM:
PJ 11:33AM (7/06/2009)
Taxpayers take a bath on bankruptcy proceedings every year--it's just that, in this case (and Chrysler's), more of them are paying attention.
Regardless of one's political opinion of the bailout/bankruptcy, getting GM in and out of court and back to making cars within the month is a good thing--and a minor miracle on Gerbe's part. In addition, GM will be walking out with exactly the makeover that, by all accounts, was all it needed to succeed. It's going to be very interesting to see what they do with it. Fingers crossed...
why not the LS2LS7? 11:38AM (7/06/2009)
I know bankruptcy means the creditors are going to have to give something up, but the idea is they get something back, and the owners of the company get something back too. In other words, chapter 11 is supposed to leave the creditors in a better position than chapter 7 does, or else your creditors would just force you straight to chapter 7.
In this case, it seems like so many people are getting wiped out. The common stockholders for example end up with nothing at all. GM has a lot of assets still. Their main problem was that they were marginally profitable at best in good times and so in bad times (like now), they are quite unprofitable. So why in this deal do so many get left holding the bag? The entire "old GM" is going to go immediately into receivership, we know that. And unless the economy turns around, the "new GM" probably will too!
I dunno, maybe I failed to understand how far behind the 8-ball GM was. I showed that several times on here with my comments about cash flow, but maybe I still don't understand how far off I was.
elprogramer 3:42PM (7/06/2009)
The public wanted General Motors to go into bankruptcy, they got it.
After months of people telling them that it wasn't going to be pretty, I have to shake my head in disgust when they complain about it now.
I can only imagine what would've happened if no public aid was offered at all; I mean, you think this recession's bad now...
TigerMil 6:18PM (7/06/2009)
Mr. Oak...too early to ascribe magnitudes better to O'man's administration...O really, you think it's 10's to 100's of times better in less than 200 days?
The dems overreached in 92 with Clinton's election...just watch them do it again...but thank god Gingrich won't be the one to save the GOP.
The problem with the O administration is that our greatgrandchildren will be paying a national debt that is orders øf magnitude greater than GWB ever had. And that taxes will rise to probably 22-26% of GDP (up from current average 18% over last 40 years) to finance the socialist state we will have become.
Tool 2:33AM (7/06/2009)
Good news, indeed.
Hopefully the sale won't be held up by the lone dissenting bondholder like in Chrysler's case. Anyone who bought these bonds knew they were a risky investment.
Now let's get the new GM going. It's time to rebuild this once great company.
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Tony 6:20AM (7/06/2009)
Delusional. See below comments for reason why. Next time I hope GM is not too big to fail.
Mr.Oak 11:05AM (7/06/2009)
Tool: In total agreement. I really don't get the folks here who thinks, that they would rather see the US auto industry fail, than help these companies restructure.
Saving GM & Chrysler will cost far less than saving Iraq from Saddam Hussein. My only hope is that the Americans whose livelihood were saved, would be a wee bit more thankful than the Iraqis I saw dancing in the streets last week.
Aloysius Vampa 2:50AM (7/06/2009)
He does look rather happy.
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JOe 11:10AM (7/07/2009)
Who will be included in the New GM exactly? Daewoo is in serious debt and Holden lost around 70 million dollars last quarter. The world economy is stagnating and that is causing GM exports to other countries to drop. What GM has to do is to be able to engineer its own cars with its own American sourced engineers, if they want to be profitable. I say keep Chevrolet, Cadillac, and Buick. That would be a nice range like Ford, Mercury, Lincoln. However, as the economy continues to slump, I think GM must streamline operations significantly to reduce cost. Since the cost cutting will be key, during this deep recession.
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Andrew 9:51AM (7/06/2009)
I think you need to watch some other news sources, or rather not just American sources, because the world economy is both good and bad. It's not all bad at all!
Some countries are feeling the pain a whole lot more than others. From my point of view the US is hurting considerably more than most European countries. At least in terms of people loosing their homes and the evil circle of unemployed people reducing sales.
And China is shifting gears to domestic consumption. Australia has enough resources to overcome the downturn. Etc, etc.
My own country is hardly feeling anything because of our huge cash reserves, people here are enjoying the low interest rates, increasing prices in the housing market. We had our housing market crash in the 90s, it's been strictly regulated since then, so no "subprimes" here.
The point is that the global economy is not that integrated, there are plenty of local variables. "One man's death is another man's bread".
why not the LS2LS7? 11:48AM (7/06/2009)
Britain and Spain took it in the shorts heavily. And Iceland is in singularly bad shape. I know the Chinese are putting a bold face out in the news (they can, as an information controlling government), but I can tell you from my friends who go monthly, the country is heavily impacted, very heavily. So much of their money comes from short-term contract work, and that shrunk considerably. The factory workers saw it immediately, being hired for a day or a week at a time, the owners of the factories saw it quarterly after their contracts ran out, and then the construction workers (the people who make up the unemployed in most countries in this recession) felt it because they went from building plants as fast as they possibly could to building no new plants in no time.
It's not just the US.
It's different things in different places. Like any recession, there are great opportunities available for people who didn't lose their job. A friend was just showing off pics of his cheap bank repo home last week at work. And remember, those who did lose their jobs because of their tricky loans didn't own their own home just three years before anyway, so they still remember how to live in an apartment.
Other Man 12:57PM (7/06/2009)
Joe does bring up a point. Holden and Daewoo aren't in tip-top shape. I do think GM ought to keep Holdie though. They rather need it for the market Down Under. Daewoo could go though. GMC's non-commercial business should be shown the door as well. Vauxhall really isn't necessary either.
The way I see it, Chevrolet should be the primary GM world brand. Holden would be an exception. From there, Cadillac would be the premier GM brand, competing with the finest. Buick would be mostly a N/S American and Asian venture, splitting the performance and luxury of Cadillac and the more affordable and less brassy styling at Chevy. That's what Buick did so well before, and it's what they should be doing now, especially with the 300C and Genesis prowling the market.
The important thing for GM to remember is to make sure you have world class products or you'll meet the very same fate pretty quickly.
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Lance 3:55AM (7/06/2009)
Loving that photo...
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GROM 4:25AM (7/06/2009)
What they try to do is to make small cars.
I mean realllyyy??? Small cars , eco baxes???
No one and I mean no one can make a better small car then a Japanese car makers ( yeah Koreans are close and China is getting better each year ). Remember that's how the started in USA by making small cars. There is no way in Hell GM can beat Toyota or a Honda in their own game especially with unions making them.
Yeah the Obama will send them a billion each year on too big 2 fail mandate but still the quality won't be there even with the subsidies.
See what the kids are driving these days and you see the future of GM.
- this is one of the best quotes that I have seen in a while from TOOL:
I just hope that you don't have any money in stocks or in 401K since then say thought process can be applied.
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GROM 4:27AM (7/06/2009)
the quote was
Anyone who bought these bonds knew they were a risky investment.
sk 6:45AM (7/06/2009)
Seriously no one, hmmmm...not even the Germans, Italians and French. I could name at least 5 cars from those countries that would beat any offerings from Japan, Korea or China.