GM in court to defend reorganization plans

NEW YORK -- General Motors will make its case for spinning off the company's good parts into a new GM and defend itself against hundreds of objections to the sweeping reorganization plan in federal bankruptcy court Tuesday.

GM Chief Executive Officer Fritz Henderson could be called as a witness, paperwork filed with the court says.

He will likely reiterate that GM's bankruptcy plan, which is backed by the Obama administration, is the only option for the struggling Detroit automaker. The company is staying afloat only because of federal loans received over the past six months.

Opponents of the restructuring demonstrated their unhappiness outside the courthouse.

A group of GM retirees organized by the IUE-CWA protested over the company's plans to terminate some retiree health care benefits.

Consumers who allege they were injured by defective GM products were also on hand to show their displeasure with GM's plan to shed liability for defects prior to the bankruptcy filing.

About 850 written objections to GM's bankruptcy plan have been received by either the company or the court, according to court files.

GM lawyers acknowledge that hundreds of parties have filed objections to GM's bankruptcy plan but note that no one has suggested "any viable alternative transaction, purchaser or financing source," according to court records.

Furthermore, GM lawyers argue that no party has argued against GM's contention that the only alternative is liquidation or the "draconian consequences to employees, suppliers, dealers, communities and the overall U.S. economy if the" bankruptcy plan "is not consummated."

They state that "approximately 99% of all dealers" have agreed to ongoing participation or wind-down agreements.

Finally, GM lawyers say: "No party or person has expressed an interest or proposed a higher or better offer or any other financing proposal."

GM says objections to its plan generally fall into 11 groups:

— Bondholders.

— Objections by dealers or relating to state franchise law issues.

— Objections to successor liability, tort, asbestos, environmental and other product liability claims.

— Objections by government agencies opposing specific plant closures.

— Objections by UAW retirees represented by "splinter" groups.

— Objections regarding workers compensation issues.

— Objections relating to tax issues.

— Objections by holders of liens.

— Objections filed by stockholders.

— Objections relating to the assumption and assignment of contracts.

— Miscellaneous objections.

Perhaps some of the most vocal opponents to GM's plan have been bondholders, many of whom are small investors.

GM dismissed their arguments that they are not being treated fairly.

"Most of the objections filed by the debtors' bondholders are nothing more than emotional reactions to the reality that unsecured creditors of the debtors will experience an economic loss," GM said in court filings.

"Although the debtors are sympathetic to the economic circumstances facing bondholders, the bondholder objections present no legitimate challenge," the company added.