In a 95-page opinion, Judge Robert E. Gerber of the Bankruptcy Court for the Southern District of New York has approved the 363 Asset Sale Plan presented by GM to sell virtually all of the remaining General Motors Corporation assets to a new entity that would be primarily owned by the Department of the Treasury. In conjunction with this streamlined transfer, the new operation -- NGMCO, Inc -- will be renamed the General Motors Company and continue operations using GM's historic corporate and sub-brands for the Buick, Cadillac, Chevrolet and GMC divisions that will remain as part of the slimmed-down organization. The deal also provides for the existing General Motors Corporation to change its name to Motors Liquidation Company and proceed to close up or otherwise dispose of all other remaining assets under the supervision of the Bankruptcy Court.
As previously announced, Fritz Henderson will continue on as president and CEO of the new Detroit-based entity, and Edward E. Whitacre, Jr., former head of AT&T, will become chairman of a largely repopulated board of directors. In return for its $60 billion in financial support, the Department of the Treasury will receive 60.8 percent of the common stock issued by the new General Motors Company. The United Auto Workers Retiree Medical Benefits Trust will get a 17.5 percent share, the Canada and Ontario governments 11.7 percent and the "old" GM 10 percent. In addition, the old GM and the UAW Retiree Medical Benefits Trust will receive warrants exercisable for 15 percent and 2.5 percent of the interests in the new GM, respectively. According to Steven Rattner, a key player in the Treasury's auto task force, the government hopes to convert about $50 billion of its holdings into a new initial public offering of stock in the new General Motors Company sometime in early 2010.
In rendering his decision favoring this expedited resolution over a traditional and far more time-consuming Chapter 11 proceeding, Judge Gerber effectively quashed arguments from a variety of bondholders, terminated dealers and other involved parties. He indicated that the quick asset sale was the best and only alternative to keep GM from having to undergo complete liquidation -- a contingency which would have had catastrophic impact on its employees, supplies and creditors. The government had previously established a July 10 deadline for the sale to be approved or it would terminate its financial support. As part of the new agreement, the Treasury Department is expected to provide another $20 billion or so in remaining bankruptcy financing to the new General Motors Company in addition to the $10 billion it has already given the existing GM operations.
In its formal statement regarding the decision, GM indicated that the new corporate structure will strengthen its balance sheet, allow it to break even and be profitable at far lower sales levels and provide greater ability to invest in advanced technology and new product development. It also intends to acquire and continue operations of its existing subsidiaries outside of the U.S. According to Henderson, "This has been an especially challenging period, and we've had to make very difficult decisions to address some of the issues that have plagued our business for decades. Now it's our responsibility to fix this business and place the company on a clear path to success without delay."