NEW YORK – General Motors Corp., hoping for a quick exit from Chapter 11, today will ask a bankruptcy judge to approve its plan to refashion itself as a leaner automaker owned mostly by the government.
The nation’s largest automaker still faces hundreds of objections from bondholders, state officials, unions and individual retirees and shareholders, but could enjoy an easier trip through the bankruptcy process thanks to the legal trail blazed just weeks ago by rival Chrysler LLC.
Last month, objections from a group of bondholders and others dragged out for three days Chrysler’s hearing on its plan to sell the bulk of itself to a group led by Italy’s Fiat Group SpA.
After the Chrysler sale was approved by U.S. Judge Arthur Gonzalez, the bondholders and other objectors appealed it all the way to the Supreme Court. Despite their efforts, the plan ultimately went through and the automaker emerged from bankruptcy protection shortly thereafter.
Jack Williams, an Atlanta-based managing director at BDO consulting and a professor of Georgia State University, said that despite the much larger size of GM’s case, he expects it to go much more quickly than Chrysler’s did.
“In the South there’s an old saying: The pioneers get all the arrows,” Williams said. “Chrysler was the test case for General Motors. GM’s got momentum, government financing and lots of people that would like to see this happen.”
Under the government-backed deal, GM will sell most of its assets to a newly created company, 60 percent owned by the U.S. government. The Canadian government will get a 12.5 percent stake while the United Auto Workers union will take a 17.5 percent share to fund its health care obligations. Unsecured bondholders receive the remaining 10 percent.
Existing GM shareholders are expected to be wiped out.
The remaining pieces of the company, including some closed plants, will become the “Old GM” and be liquidated.
Major roadblocks that could still slow GM’s plan for a quick sale are bondholders who claim they deserve more in exchange from their investments and state officials worried about the economic effects of the restructuring.
In addition, the IUE-CWA, United Steel Workers and the International Union of Operating Engineers are objecting to the sale, claiming that their retirees stand to lose heath care benefits if it goes through. Unlike the UAW, which brokered a deal for its stake in the company, the trio of other unions say they won’t have anything to pay for retiree health care.