An American bankruptcy court judge has approved the government-brokered restructuring of General Motors, less than a month after a financial restructuring of rival Chrysler was also rubber-stamped by the US legal system.
With bondholders in the automakers still complaining that the administration had ridden roughshod over established bankruptcy law to push through its rescue of the US car industry, Judge Robert Gerber said that the proposed sale of GM's assets was the only option to "prevent the death of the patient on the operating table".
Under the plan, GM's best assets are being sold to a "new GM" that will be majority-owned by the US taxpayer. A union-run trust will own 17.5 per cent of the company, to fund healthcare benefits for employees. Investors holding $27bn of GM bonds will get just 10 per cent, and no cash.
"The US Treasury, in making hard decisions about where to spend its money and make 'new GM' as viable as possible, made business decisions that it was entitled to make," Judge Gerber wrote, in a 95-page judgment released late on Sunday.
"As nobody can seriously dispute, 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," he went on. "In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing."
A group calling itself the Unofficial Committee of Family & Dissident GM Bondholders had argued that the government had been overbearing in its negotiations with bondholders. Other opposition groups included some of GM's dealerships, 40 per cent of which will be closed under the plan, and the victims of accidents involving GM cars. Accident litigants filed an appeal against Judge Gerber's ruling yesterday. The sale has been stayed four days to allow for higher courts to examine the sale.
The sale of Chrysler to Italy's Fiat was agreed last month, after bondholders took their opposition all the way to the US Supreme Court.