Legal News

GM bankruptcy plan gains approval

By (Breaking Legal News)

General Motors cleared a major hurdle toward a quick exit from bankruptcy as a judge approved a government-backed plan to create a "new GM" that sheds major debts of the ailing Detroit automaker.

The ruling released late Sunday paves the way for a "reinvention" of 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.

Judge Robert Gerber said he had examined about 850 objections to the restructuring plan raised by GM bondholders and others, but found there were "no realistic alternatives" to the asset sale.

"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," Gerber wrote.

GM hailed the decision as "another step toward the launch of an independent new GM."

GM president and chief executive Fritz Henderson added that now "it's our responsibility to fix this business and place the company on a clear path to success without delay."

The judge said GM could implement the plan as soon as Thursday at 1600 GMT pending any additional delay imposed by an appellate court.

At least one appeal had been filed Monday, from accident victims seeking to hold the new GM accountable for any product liability damages.

Once the world's largest corporation, the new GM will emerge as a significantly smaller automaker with fewer brands and employees, and a diminished global footprint.

GM's plan seeks to follow the script of Chrysler, which spent 42 days in bankruptcy protection before emerging as a new company run by Italy's Fiat.

As with Chrysler, GM's old corporate entity will remain under supervision of the bankruptcy court, but the new GM will not be burdened by the lengthy process.

Full post as published by Breaking Legal News on July 06, 2009 (boomark / email).