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Federal Bankruptcy Court Approves GM Asset Sale to New GM
6 July 2009
Judge Robert Gerber of the US Bankruptcy Court for the Southern District of New York approved the sale of substantially all of General Motors Corporation’s assets to NGMCO, Inc., an entity funded by the US Department of the Treasury. The approval marks a necessary step toward the emergence of GM from bankruptcy; the US Treasury has said it would halt funding to GM if the asset sale was not concluded by 10 July.
In connection with the closing of the sale transaction, NGMCO, Inc. will change its name to General Motors Company and continue to operate under GM’s historic corporate and sub brands. The current General Motors Corporation will change its name to Motors Liquidation Company. Retained assets will be wound down or sold. A new board of directors will oversee that process and the liquidation of the company under the supervision of the Bankruptcy Court.
The new company will acquire GM’s strongest operations and will have a more competitive operating cost structure, partly as a result of recent agreements with the United Auto Workers (UAW) and Canadian Auto Workers (CAW).
The new GM will have lower leverage and a stronger balance sheet, which when combined with a lower break-even point, will allow it to reduce its risk, operate profitably at much lower volume levels, and to reinvest in the business in the key areas of advanced technology and product development. GM’s subsidiaries outside the United States will be acquired by the new company and are expected to continue to operate without interruption.
The new GM will be headquartered in Detroit and will be led by Fritz Henderson as president and chief executive officer and Edward E. Whitacre, Jr. as chairman of the board of directors.
The new GM’s common stock will be owned by:
- US Department of the Treasury: 60.8%
- UAW Retiree Medical Benefits Trust: 17.5%
- Canada and Ontario governments: 11.7%
- The old GM: 10%
Additionally, the old GM and the UAW Retiree Medical Benefits Trust will hold warrants that are exercisable for 15% and 2.5% of the interests in the new GM, respectively.
The UAW Retiree Medical Benefits Trust and the Canadian government each may nominate one member to serve on the board of the new GM. The retiree benefits trust has selected seasoned auto industry analyst Stephen Girsky. Also selected to serve on the board of directors of the new GM are six current members of the General Motors Corporation board, including Erroll Davis, Neville Isdell, Kent Kresa, Philip Laskawy, Kathryn Marinello and Fritz Henderson. The Canadian government representative and four additional board members to be identified by the US Treasury will be announced at a later date.
Judge Gerber’s order includes a four-day stay before closing of the sale can occur. However, GM expects the sale to close in the near future. The new GM’s business is expected to be immediately operational and fully competitive. Current GM employees will be offered positions by the new company.
July 6, 2009 in Market Background, Vehicle Manufacturers | Permalink | Comments (12) | TrackBack (0)
Comments
Posted by: wintermane2000 | July 06, 2009 at 09:30 AM
They still have to build good cars that people want and sell at the right prices. It does little good to get a good balance sheet and then wipe it out making bad products.
Posted by: SJC | July 06, 2009 at 09:32 AM
The cluster bleep the admin made in this was forgetting who was actualy BUYING gms in america... They couldnt have killed off gm faster if they had nuked it.
Id rather buy a car made in iran by the taliban then buy a gm now.
Posted by: wintermane2000 | July 06, 2009 at 11:09 AM
Seems the six GM execs should be dropped from the board in favor of 6 Ford execs for the New GM.
Posted by: Paroway | July 06, 2009 at 12:03 PM
Extended Oil Interests, EV Crushers Corp, Executive Featherbedding Inc., NiMH Battery Burial Unlimited may also satisfy a bankrupt court, but it seems Motor Liquidation Company will do.
Posted by: kelly | July 06, 2009 at 01:22 PM
What could possibly go wrong?
Posted by: Matthew | July 06, 2009 at 01:42 PM
"Unfortunetly because of the way they set up the agreement it actualy violated the law and that means the entire thing is totaly farked."
Since it is a court that made the ruling, they didn't actually break the law, they changed it. Now there is a precedent, we'll have to wait and see if it makes a big difference in other bankruptcy cases
Posted by: Simodul | July 07, 2009 at 04:49 AM
Id have to bother to look up the law again it came up in a financial site I sometimes wander through but basicaly this is entirely different from the mess with uaw vs investors and is instead very basicaly everyone on the same tier debt holder wise as the uaw HAD TO BY LAW get the exact same deal. You cant treat any one group in the same rung on the debt ladder differently.
The result is everyone else on that tier can sue the gobstopped out of BOTH old and new gm and cant lose the suit.
Posted by: wintermane2000 | July 07, 2009 at 08:42 AM
What many do not realize is that this frees the company to concentrate on smaller, greener cars of fewer types with less excess horsepower.
Cars people want.
This situation is similar to the German experience.
The West made multiple brands, some with high horsepower, some SUVs. Cars no one wants.
The East made one model.
Just look at the BMW 300s, 500s and 700s, the VW in bewindering varieties, the MB C, E, S, ML, the Porches and the Audis
and compare them to
the elegantly simple, low cost, ultimately green, peoples car - The Trabant.
You be the judge.
Posted by: ToppaTom | July 07, 2009 at 09:56 PM
@wintermane
What I meant was: the way the American judicial system works, when a court decides something, it creates a case law, whiwh has the same force of law as one voted in Congress and is that is true until another court decides otherwise (which would again be a ruling against the law) or until it is overturned by a "higher" court. That's how the system works, so that a Congress-voted law can be "interpreted" for every particular case.
But you are right saying that if anyone tried to object to that ruling, he or she should prevail: all the bankruptcies up to now obeyed to the tier debt holder principle.
Posted by: Simodul | July 08, 2009 at 12:55 AM
Ya thats basicaly all I was saying. Sooner or later this is gona blow up in thier faces.
Posted by: wintermane2000 | July 08, 2009 at 10:18 AM
Regardless of the legalities, how long will it take for the New GM and New Chrysler to go Chapter 7.
This may be where they should have gone in the first place.
With GM and Chrysler out of the way, the others would have a better chance to survive.
That's how normal free world business goes.
Governement funds may only delay the unavoidable, if company culture is not changed enough to produce better/cleaner electrified vehicles for the 21st Century.
One may place his bet on BYD, Tata, and other more productive manufacturers.
Posted by: HarveyD | July 09, 2009 at 10:49 AM
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Unfortunetly because of the way they set up the agreement it actualy violated the law and that means the entire thing is totaly farked.