By selling its best assets to a new, leaner company in which the U.S. government will hold a majority stake, General Motors could exit bankruptcy protection as soon as July 9. The deal could close "immediately" after a stay imposed by a bankruptcy judge is lifted at noon government lawyers said in a court filing.
GM, which filed for bankruptcy protection on June 1 and has vowed to emerge as a leaner, more profitable company once freed from its burdensome debts, won court approval on July 5 for the asset sale. However, Judge Robert Gerber imposed a four-day stay on the decision in order to give creditors an opportunity to file objections.
Two groups of creditors asked the New York court to extend a stay on the sale of the assets while their appeals were heard, but Gerber dismissed their motions on July 7 in a decision which paved the road for a speedy exit.
"It's extremely unlikely that they will get a higher judge to issue a stay," said John Pottow, who specializes in bankruptcy law at the University of Michigan Law School.
A binding precedent was recently set when the U.S. Supreme Court refused to delay the sale of Chrysler's assets to a new company run by Fiat despite creditor objections, Pottow noted.
But while GM's operating costs will be significantly lower, it could be a while before they are able to sell enough vehicles to make a profit, cautioned Rebecca Lindland, an analyst with IHS Global Insight. "Their biggest problem is perception, and that's the hardest to fix," Lindland said.
While GM's product offerings are strong, they've had trouble getting consumers to take them out for a test drive due to years of quality problems and bad press.
Meanwhile, overall auto sales continue to be weak after collapsing last fall amid a credit crunch and financial market meltdown.
"There are reasons to be cautiously optimistic about the company," Lindland said. "They need to get new buyers excited about their products."
As with Chrysler, GM's old corporate entity will be liquidated under supervision of the bankruptcy court, but the new GM will not be burdened by the lengthy process.
President Barack Obama, whose auto taskforce spearheaded the GM restructuring plan, has said his administration has no intention of nationalizing the automaker over the long term and will not be participating in its day-to-day operations. A senior member of the taskforce testified last week that the government could begin to sell its stake as early as 2010, once the new company is ready to launch a public stock offering.
Copyright Agence France-Presse, 2009