Pat Dollard

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Washington Times:

A Manhattan bankruptcy judge approved the sale of General Motors to the U.S. government on Sunday, saying it was the only alternative to closing down the storied Detroit automaker.

The decision gives the Obama White House a second major victory in its drive to remake the U.S. auto industry by sponsoring the quick restructuring in bankruptcy of both GM and Chrysler. The decision in the GM case took only a few days longer than the same New York bankruptcy court’s decision to allow the sale of Chrysler to Fiat, which was barely a month ago. Both cases cleared the court in nearly a month’s time — a record for such large bankruptcies.

Judge Robert Gerber said in his 95-page opinion that the sale of GM to U.S. taxpayers within the week will “prevent the death of the patient on the operating table.”

“GM cannot survive with its continuing losses . . . and without the government funding that will expire in a matter of days,” he said, referring to a White House threat to pull funding for GM by the end of this week if the sale wasn’t approved.

The judge provided a four-day stay of the order, giving GM bondholders and others objecting only hours to appeal the decision to higher courts. A similar sale of Chrysler out of bankruptcy was appealed all the way up to the Supreme Court.

Under the deal, a “new GM” would emerge from bankruptcy with all of the company’s most valuable and profitable operations, including the Chevrolet and Cadillac brands, while the company would be shorn of most of its huge debts and have a smaller, more efficient workforce and network of dealers.

The judge rejected the argument of a small group of bondholders who opposed the sale that the company could have restructured through normal, prolonged bankruptcy procedures.

“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 existence, and the communities in which GM operates,” Mr. Gerber wrote. “In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.”

The judge also rejected arguments from bondholders, dealers and others that the Treasury illegally used strong-arm tactics to force the restructuring through the courts and past creditors who had the right to greater compensation.

“The U.S. Treasury, in making hard decisions about where to spend its money and make New GM as viable as possible, made business decisions that it was entitled to make,” he wrote.

The Treasury agreed to provide GM with $60 billion in financing to ensure it emerges as a profitable company again from the bankruptcy. For that unprecedented amount, the Treasury would receive a 60 percent stake in the company. Canada would gain a 12.5 percent share and GM’s autoworkers union would receive 17.5 percent. Bondholders would get the remaining 10 percent.

The “old GM,” which includes unprofitable and unpopular brands such as Saturn as well as shuttered factories and other cast-off facilities, would remain in bankruptcy possibly for years with the goal of liquidating the assets and distributing the proceeds to bondholders, suppliers, dealers and other creditors left behind.