General Motors headed to bankruptcy court on Tuesday to seek approval for the linchpin of its turnaround plan, the sale of its best assets to a new government-backed company.þþIf the motion is approved, a new G.M., owned primarily by the American and Canadian governments and a union health care trust, would emerge little more than a month after the carmaker sought Chapter 11 protection in early June in one of the country’s most significant bankruptcy filings.þþThe proceedings looked likely to extend for at least another day, as testimony from Fritz Henderson, G.M.’s chief executive, and several company advisers stretched into Tuesday night. The carmaker and the Obama administration are pushing to conclude the sale by July 10.þþMr. Henderson, who has been chief executive for three months, testified in the case, held in Federal Bankruptcy Court before Judge Robert E. Gerber, for five and a half hours.þþUnlike Chrysler, G.M. has so far not faced a significant roadblock to a speedy turnaround. þþAmong the main objectors to its asset sale is a committee of three dissident G.M. bondholders who claim to hold $2.3 million in bonds that they bought for no more than $20 for $1,000 in face value. Others include unofficial committees representing product liability claim holders and asbestos litigants.þþDuring his time on the stand, Mr. Henderson testified that the cost of winding down the remains of G.M. could reach $1.2 billion, depending on litigation. The company plans to leave $950 million in cash in its bankruptcy estate to take care of claims.þþHe also testified that customers appeared to show increased confidence in G.M., in part because Chrysler won approval for a similar turnaround plan in just 42 days. But G.M. still expected to lose money in June, with sales down more than 20 percent from the same time last year.þþMr. Henderson said the Treasury Department was pushing for a conclusion to the sale that would create what is being called New G.M. by July 10.þþThe hearing drew hundreds of spectators who filled the courtroom and three observation rooms. Protesters representing unions adversely affected by G.M.’s restructuring plan arrived in the morning to protest the sale motion.þþThe Treasury has named a new G.M. chairman, Edward Whitacre Jr., the former chief executive of AT&T, and is expected to recruit several new directors.þþLawyers for G.M. argued that the proposed sale under Section 363 of the federal bankruptcy code was “the only viable alternative” that would allow for G.M.’s transformation. Without the creation of New G.M., they said in court documents, the company would be forced to liquidate.þþG.M., which sought bankruptcy protection on June 1, is operating on financing provided by the Treasury Department and Canada. Before it filed for bankruptcy, the automaker had drawn $20 billion in Treasury funds. The government estimates it and Canada will provide G.M. with $30 billion more as it operates under court protection.þþUnder the plan, the United States government would take a 60 percent stake in the newly formed company, the United Automobile Workers union would have a 17.5 percent stake, the Canadian government would own about 12 percent and G.M. bondholders were expected to get about 10 percent.þþOtherwise, G.M.’s options appear limited. “There are no lenders willing and able” to finance the company, and no merger partners or potential acquirers willing to purchase the automaker, its lawyers said.þþIn his testimony on Tuesday, Mr. Henderson said that the new G.M. would have a “fundamentally changed and improved” operating and capital structure. þþHe predicted it would “restore confidence on the part of consumers that they can purchase a G.M. vehicle without concerns regarding residual value, replacement parts, warranty obligations and maintenance. Employees, suppliers, dealers and communities will be able to depend on New G.M. as an economically viable and competitive enterprise.”þþThe Treasury is backing the warranties of G.M. vehicles purchased while the company operates under bankruptcy protection, as it did for Chrysler. A new version of Chrysler was approved earlier this month, with the Italian automaker Fiat taking management control.þþIndustry analysts say a reconstituted G.M. may help bolster what is turning out to be the worst market for auto sales since the early 1980s. Although sales have improved slightly from the beginning of the year, the car companies are on track to sell only about 10 million vehicles this year, down 40 percent from 2007.þþThe company has shut 13 of its assembly plants in the United States for up to 11 weeks as part of a bid to cut production and run down inventory while it seeks approval of the sale.þþThe company plans to shed dealer contracts and has deals to sell brands like Hummer and Saturn that will not be carried over to the new company. It also plans to end the Pontiac brand, and G.M. said on Monday that it would cut operational ties with a Northern California auto plant it had operated in a joint venture with Toyota Motor.þþSeveral G.M. dealers who are set to lose their franchises have protested the company’s plans to members of Congress. Bankruptcy law allows companies to sever contracts, including those with franchise holders. Over the weekend, G.M. agreed with the government that the new company would assume responsibility for product liability claims, even if they were incurred by the old G.M.þþ
Source: NY Times
