New GM almost ready to roll - Bankruptcy protection could end next week

New GM almost ready to roll - Bankruptcy protection could end next week
By Bernard Simon in Toronto and Nicole Bullock in New York
Copyright The Financial Times Limited 2009
Published: July 3 2009 00:21 | Last updated: July 3 2009 00:21
http://www.ft.com/cms/s/0/90a5d97e-675c-11de-925f-00144feabdc0.html


A new General Motors could emerge from bankruptcy protection next week if a federal judge approves its restructuring plan, as seems likely.

Judge Robert Gerber adjourned proceedings after the US carmaker indicated it would revise some terms of the plan to accommodate objections. It filed a revised plan with the Securities and Exchange Commission late on Thursday.

The restructuring, under section 363 of the US bankruptcy code, would be a landmark in the Obama administration’s efforts to reshape the car industry. Chrysler, GM’s Detroit-based rival, has gone through a similar process, emerging as a new company last month after 41 days in Chapter 11. GM filed for court protection on June 1.

GM is planning a campaign to persuade Americans that it is a nimbler company making vehicles worthy of their respect.

Several new directors will be appointed and Fritz Henderson, chief executive, has indicated that an extensive management shake-up is in the works.

One person familiar with GM’s thinking said the changes would give top management a younger, more diverse dimension, including promotion of several executives from GM’s overseas operations.

The US and Canadian governments will own 72 per cent of the new GM, with stakes held by a union healthcare fund and existing bondholders.

Unwanted assets, such as idled plants and other real estate, will remain in the existing company in Chapter 11 to be sold or wound down. As part of the restructuring, GM is looking for an outside investor for its European operations.

GM laid the groundwork for its speedy trip through the courts by taking a less confrontational stance than Chrysler.

As in Chrysler’s case, GM and the government have stressed the importance of speed in the restructuring.

Harvey Miller, GM’s chief counsel, told the court on Thursday: “The longer we stand here, [the longer] GM’s market share is eroding.”

The revised plan includes an increase in US government support for winding down the existing company from $950m to $1.18bn. The funds are part of $33bn in debtor-in-possession financing provided by the US and Canadian government to help GM operate during the bankruptcy proceedings.

The official committee of unsecured creditors and trustees for the bondholders said they supported the revised deal.