Federal Bankruptcy Judge Clears New GM for Takeoff

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.