Federal Bankruptcy Judge Clears New GM for Takeoff

Robert Farago
by Robert Farago

Here’s the (warning) 87-page ruling that allows “Old GM” to sell its best assets to “New GM.” The bottom line: Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York brushed aside objections by dissident bondholders and product-liability claimants. Judge Gerber accepted the government/bankrupt automaker’s argument that there was no alternative to the Old-to-New-GM asset sale save liquidation, which would be “a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates.” What’s more (or less), “In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.”

Before the ruling, TTAC contributor Steve Jakubowski told us the that judge was largely sympathetic to his argument that New GM should retain legal responsibility for the products created by Old GM. Fat lot of good that did, as The Wall Street Journal reports:

In his ruling, Judge Gerber said the question of whether the new GM should be subject to so-called “successor liability” represented “the only truly debatable issues in this case.” But the judge said he was bound by legal precedent – including Chrysler’s recent sale to Fiat SpA free of such liabilities – in not making GM go further than it already had on product-liability claims.

Jakubowski will appeal. “Injuries before New GM becomes official will not be covered by New GM,” the lawyer told us. “Injuries after closing are covered.” Meanwhile, The Detroit Free Press provides a profile of the man assigned to “lead” Old GM into oblivion: Al Koch.

Koch comes to praise ex-GM CEO Rick Wagoner (“You feel badly for a guy that you like. Rick’s a guy who worked his tail off for the company for a long time”) and to bury him (“Even as former Chief Executive Officer Rick Wagoner and others at GM kept warning that consumers would not buy vehicles from a bankrupt automaker, the company was quietly preparing for Chapter 11”). Note: told ya.

Strangely, The Freep doesn’t ask Koch how much he or his firm charged Old GM so far, or will charge New GM to “dispose of 50 surplus GM properties and wrangle with bondholders, product liability lawyers and others trying to grab a few crumbs from what’s being discarded by GM.” Brrrr.

Uncle Sam’s set aside $1.175 billion (up from $950 million) to euthanize Old GM. It’s not clear whether Alix’s crew will wet their beak from that billion, or get a separate pay-off. Lest we forget, a trustee for the feds called GM’s previous bankruptcy-related legal fees gross and unjustifiable. So much for that then. And according to a source speaking to TTAC about the cost of environmental clean-up, the money assigned in that regard is woefully inadequate. TTAC is investigating.

Robert Farago
Robert Farago

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  • U mad scientist U mad scientist on Jul 06, 2009
    The fact remains that a number of respected law professors and financiers including financial supporters of Obama have said that the treatment of senior and secured creditors in the Chrysler bankruptcy were highly irregular and could jeopardize investments. You can pound on the table all you want but the fact remains that senior secured creditors were screwed in favor of the UAW because Obama was able to pressure enough of the creditors who were TARP recipients to cave. The actual facts of the case have been shown numerous times before. I've issued the challenge to product legal details, and I've received exactly one taker thus far: http://www.thetruthaboutcars.com/more-to-love-about-the-chrysler-asset-sale/ Suffice to say, the challenger did not fare well. Perhaps you can find someone who actually bothered to find out what kind of bankruptcy the d2 are going through. Personally, I only find it a bit curious that the conspiracy theorists can still find the gall to make accusations after the intellectual beatdowns they've been on the receiving end of.
  • U mad scientist U mad scientist on Jul 06, 2009
    buyers of “old GM” cars should not be warned they’ll have no legal protections, Their legal rights are exactly as they've always been. But now they going to have to fighting for cash against the owners of old GM (Saviors of Capitalism no doubt in the mind of the business-knowledge challenged). Perhaps those guys (Heros of the Right) are going to be more generous than the taxpayer, but I wouldn't count on it. It all makes statements like these super hilarious: Take care of the lawyers and the unions. "Take care of" must mean screw in their special vocabulary. People realize that the lawyers are pissed they're stuck with the old company, right?
  • ToolGuy First picture: I realize that opinions vary on the height of modern trucks, but that entry door on the building is 80 inches tall and hits just below the headlights. Does anyone really believe this is reasonable?Second picture: I do not believe that is a good parking spot to be able to access the bed storage. More specifically, how do you plan to unload topsoil with the truck parked like that? Maybe you kids are taller than me.
  • ToolGuy The other day I attempted to check the engine oil in one of my old embarrassing vehicles and I guess the red shop towel I used wasn't genuine Snap-on (lots of counterfeits floating around) plus my driveway isn't completely level and long story short, the engine seized 3 minutes later.No more used cars for me, and nothing but dealer service from here on in (the journalists were right).
  • Doughboy Wow, Merc knocks it out of the park with their naming convention… again. /s
  • Doughboy I’ve seen car bras before, but never car beards. ZZ Top would be proud.
  • Bkojote Allright, actual person who knows trucks here, the article gets it a bit wrong.First off, the Maverick is not at all comparable to a Tacoma just because they're both Hybrids. Or lemme be blunt, the butch-est non-hybrid Maverick Tremor is suitable for 2/10 difficulty trails, a Trailhunter is for about 5/10 or maybe 6/10, just about the upper end of any stock vehicle you're buying from the factory. Aside from a Sasquatch Bronco or Rubicon Jeep Wrangler you're looking at something you're towing back if you want more capability (or perhaps something you /wish/ you were towing back.)Now, where the real world difference should play out is on the trail, where a lot of low speed crawling usually saps efficiency, especially when loaded to the gills. Real world MPG from a 4Runner is about 12-13mpg, So if this loaded-with-overlander-catalog Trailhunter is still pulling in the 20's - or even 18-19, that's a massive improvement.