Sale of good assets needed to save GM, CEO testifies
NEW YORK -- General Motors CEO Fritz Henderson on Tuesday told a bankruptcy court judge that the automaker's only hope for survival is to sell off the good assets to the federal government and liquidate the rest.
He told the court that if the deal doesn't happen by July 10, GM could lose access to government funding and be forced to liquidate the entire company. Tuesday was the first day of hearings on the proposed asset sale at the New York bankruptcy court.
The GM sale hearing, before Judge Robert Gerber, is expected to continue for at least two days, as the sale plan faces objections and questions from its creditors committee, a group of dissenting bondholders, people with product and asbestos liability claims, unions and dealers.
A successful sale creating a "New GM" would mark the second big victory for the Obama administration's autos task force, which in June won approval for brokering the sale of Chrysler assets out of bankruptcy court to a group led by Italy's Fiat. The U.S. Supreme Court cleared the way for that deal on June 9.
No competing bidders have emerged as an alternative to the U.S. government's $60 billion financing for GM. That includes a proposed equity investment of $50 billion that would give the U.S. Treasury 60% ownership.
Under the plan, the United Auto Workers union would gain a 17.5% stake in New GM, the Canadian government would own about 12% and GM bondholders are expected to get about 10%.
Lawyers representing bondholders, a smaller union and asbestos claimants questioned Henderson on Tuesday. The deal is expected also to face opposition from retirees, consumer groups and dealers. The judge warned early in the day that the court does not have time to hear from every interested person.
If the deal is approved, GM will be able to sell its best assets, including Chevrolet and Cadillac, under Section 363 of the bankruptcy code, to New GM, with the Treasury providing billions of dollars in financing. GM's old assets would remain behind in bankruptcy court to be liquidated.
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