GM's Bankruptcy Could Cost $1 Billion in Legal Fees
General Motors and Chrysler have both retained “hot shot” law firms to advise them on bankruptcy matters. Want to know what their legal bills will look like?
GM has retained a firm named Weil, Gotshal & Manges, a huge organization that specializes in pretty much everything big business, including bankruptcy law. They represented Enron, WorldCom, and Lehman Brothers in all of their bankruptcy proceedings. The Lehman proceeding was just this past October, so the rates are current. As far as I know, Weil’s rates are standard for the market – expect Chrysler’s firm Jones Day to be very similar. For the Lehman matter, Weil billed at:
$650-$950/hour for partners and counsel
Bloomberg estimated that Weil’s total bill for the Lehman Bankruptcy could be as high as $906 million. While Lehman was worth a lot more than GM, there was also much less work to do. I’d guess that a GM bankruptcy could cost $1 billion just in legal fees. And that’s not counting the collateral damage – suppliers, contractors, dealers.
Immensely bored law student. I've also got 3 dogs.
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The associates probably aren't cooking up grand legal strategy, they are doing the grunt work (gathering evidence, paperwork, and otherwise reducing the # of hours the partners have to spend on the easy stuff).
In the top law firms, associates are expected to bill between 2100 and 2300 hours in addition to mandatory pro-bono work. The latter number is over 6 billed hours per day, 365 days per year. In practical terms, that translates to workweeks of upwards of 80 hrs with rare layoffs for weekends or holidays. That's only after being pummeled through three years of law school to graduate in the top 10%, and paying $110,000 for the privilege. Of what the partners bill, perhaps $130K gets back the associate. Relative to the time commitment, the money hardly seems worth it. Bankruptcy law on GM's scale requires tremendous expertise and the stakes are enormous. It's highly specialized work, and $355/hr to have some of the brightest minds in the United States wade through it is a bargain. I'm sure Joe Attorney would be more than willing to handle your no-fault divorce for a couple bucks; corporate bankruptcy is an entirely different ballgame.
So now we learn that bankruptcy for GM is not as wonderful as often portrayed at TTAC. There are huge hidden costs to bankruptcy. It looks easy, quick and the solution to a difficult problem, but as it happens control of the situation is lost. Perhaps Rick Wagoner has it figured out better than some posters here. The American people will pay dearly bailout or no bailout. Stupidity is expensive.
From a lawyer: the sort of law firm which gets this work is a huge operation...your storefront guy can't do this. You are in a top 10% of the top 10% of the profession. The associate may bill that high, but he does not get that much. A big firm is a pyramid scheme. If you can survive it, you can be a partner (about 7% of those from my class, 1983, who get into the "big firm" get that brass ring. The rest become "senior associates" or "nonequity partners"). The guy on the bottom is putting in insane hours (on salary), and while well compensated for someone who has to get directions to the Courthouse, will probably burn out in a few years if not "partnership track". Most attorneys don't work for this kind of Operation, and we are entertained when they try to do their own Municipal Court case or their own house closing. These high billables are very rare, which is why they are newsworthy.