New York - General Motors stood a critical step closer to
ensuring its survival Monday after a bankruptcy judge approved what
amounts to a government takeover of its operations in the United
States and Canada.
The deal could give GM the chance for a fresh start by allowing
the ailing carmaker to sell its best brands into a new company that
is largely debt free and propped up by billions of dollars in
government loans.
But the New York district court's decision was immediately
appealed Monday by a group that is suing the company for personal
injury claims, delaying GM's emergence from bankruptcy.
The plan was also fought over three days of hearings last week by
hundreds of dissatisfied creditors, car dealerships and some union
workers who will lose benefits. The groups argued they got a poor
deal from the government and hoped for more money in liquidation.
Bankruptcy court Judge Robert Gerber, in an opinion late Sunday
night, said nationalization was the only option for the largest US
carmaker. He warned that liquidation would be devastating for the
company and the car manufacturing community.
'The only alternative to an immediate sale is liquidation - a
disastrous result for GM's creditors, its employees, the suppliers
who depend on GM for their own existence, and the communities in
which GM operates,' Gerber wrote in his opinion.
'Bankruptcy courts have the power to authorize sales of assets at
a time when there still is value to preserve - to prevent the death
of the patient on the operating table,' he wrote.
Gerber noted that GM could not survive without some 30 billion
dollars in government loans, which President Barack Obama's
administration threatened to withdraw if the sale was not approved by
July 10.
The US government will get a 60-per-cent stake and the Canadian
government a 12-per-cent share of the 'New GM' company in exchange
for the loans. A union health care trust will get 17.5 per cent and
the bondholders 10 per cent to forgive some 27 billion dollars in
company debt.
The Detroit-based manufacturer entered bankruptcy on June 1 and
went to court to seek what amounted to a government takeover. Gerber
rejected challenges from about 850 different groups.
GM is shedding a series of iconic brands in order to become viable
again, including German subsidiary Opel, Britain's Vauxhall, Swedish
maker Saab and US brands Hummer, Saturn and Pontiac.
US carmakers have been hit hard by the country's deep recession,
which has sent sales plummeting more than 35 per cent since October.
But Detroit has also struggled for years to adapt to the influx of
leaner, greener foreign rivals.
'This has been an especially challenging period, and we've had to
make very difficult decisions to address some of the issues that have
plagued our business for decades,' said GM chief executive Fritz
Henderson, who will remain head of the firm.
'Now it's our responsibility to fix this business and place the
company on a clear path to success without delay,' Henderson said in
a statement.
Last week, GM's smaller rival Chrysler restarted production at
seven factories after emerging from bankruptcy earlier in June under
the control of Italian manufacturer Fiat.
The merger with Fiat spared Chrysler from a complete collapse,
allowing it to shed loss-making brands and exit the bankruptcy
process about three weeks ago. The US government has provided
billions of dollars to both US carmakers in emergency loans.
USA
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