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NEW YORK: A US bankruptcy judge late Sunday approved a restructuring plan for troubled car manufacturing giant General Motors that calls for selling its assets to a new government-backed company.
"The 363 transaction is approved," Judge Robert Gerbert wrote in his ruling, referring to the plan.
Gerbert said he had examined about 850 objections to the restructuring plan raised by GM stockholders and others, but argued that he could not find them valid.
"Once again, the court is sensitive to their concerns, but cannot help them," he wrote. "GM is hopelessly insolvent, and there is nothing for stockholders now. And if GM liquidates, there will not only be nothing for stockholders; there will be nothing for unsecured creditors."
GM, which filed for bankruptcy protection on June 1 after reaching agreements with its main union and the bulk of its major creditors, is said to be planning to launch the new company in mid-July.
That would be well ahead of the 60 to 90 day timeframe predicted by President Barack Obama's administration, which spearheaded the process.
Chrysler, which is about a third of the size, spent 40 days in bankruptcy protection and even an appeal to the Supreme Court did not block its sale to a new company run by Italy's Fiat.
Like Chrysler, GM's weaker assets will be liquidated through the New York bankruptcy court, but the new GM will not be burdened by the lengthy process.
The cost of liquidating GM's remaining assets could be as high as 1.2 billion, chief executive officer Fritz Henderson testified on Tuesday.
Under the proposed plan, the US government will own 60.8 per cent of GM's capital in exchange for some 50 billion dollars in emergency loans.
Canada, which also provided billions in loans, will have 11.7 per cent and a United Auto Workers retiree healthcare trust fund will hold 17.5 per cent.
Creditors holding GM bonds will swap 27.1 billion dollars in debt for a 10 per cent stake and warrants allowing them to buy an additional 15 per cent stake.
Obama has said his administration has no intention of nationalising General Motors over the long term and will not be participating in its day-to-day operations.
A senior member of Obama's automotive task force testified last week that the government could begin to sell its stake as early as 2010, once the new company is ready to launch a public stock offering.
GM was able to move through the process swiftly because it spent months preparing for the bankruptcy process and reaching agreements with its main union and most of its creditors.
While the new GM will have a significantly stronger balance sheet after having slashed its labour costs and shut factories to rid itself of excess capacity, it must still contend with the collapse in auto sales which pushed it into court protection.
US auto sales appear to have stabilised after falling to levels not seen in decades, but analysts warned it would likely be months before they recover from the current depressed rate.
Total US auto sales fell 28 per cent in June, the first time sales have fallen by less than 30 per cent since the market crashed in October of 2008, according to Autodata.
Sales for the first half of the year were down 35.1 per cent at 4.8 million vehicles, according to Autodata.
GM's sales trailed the market, falling 34 per cent in June and 41 per cent for the first six months of the year.
- AFP/so
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