Automakers

Return to Article

GM's Fate Still Yet To Be Decided

The Associated Press

NEW YORK -- A hearing to determine the fate of General Motors (GMGMQ) will continue Wednesday, with the automaker expected to face more objections to its plan to sell the bulk of its assets to a new company and quickly emerge from bankruptcy protection.

Attorneys, bondholders, consumer groups and others packed a Manhattan courthouse Tuesday to hear about five hours of testimony by GM CEO Fritz Henderson, who said the No. 1 U.S. automaker's sale is necessary to get GM back on its feet quickly. Henderson cautioned that the government could walk away from the deal if the sale doesn't close by July 10.

Parties are expected back in court at 8 a.m. EDT Wednesday.

General Motors, whose bankruptcy filing on June 1 was the fourth-largest in U.S. history, is hoping to avoid a lengthy sale hearing that could postpone its emergence from bankruptcy protection. Last month, objections from a group of bondholders and others dragged out rival Chrysler's hearing for three days.

When asked about the current condition of GM, Henderson testified that the automaker's sales in June were "slightly better than expected" excluding fleet sales, which he partly attributed to the company's progress toward a quick exit from bankruptcy protection.

Under a government-backed deal, GM will sell most of its assets to a newly created company, which will be 60% owned by the U.S. government. The Canadian government will get a 12.5% stake while the United Auto Workers union will take a 17.5% share to fund its health care obligations. Unsecured bondholders receive the remaining 10%.

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.

GM hopes to emerge as a leaner company, less burdened by debt and labor costs as it faces a severe recession that has sapped car and truck sales. Automakers, which are due to report June U.S. sales on Wednesday, have seen sales fall 37% over the first five months of the year.

Separately, GM said Wednesday that sales in China jumped 38% in the first half of this year, helped by strong demand for its minivans and other small vehicles.