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Judge Robert E. Gerber Approves GM Plan to Sell Assets: NGMCO INC.
By Amarendra Bhushan for CEOWORLD Magazine Updated:July 6, 2009
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A U.S. judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approved General Motors Corp’s bankruptcy sale in a move that will allow the company’s most profitable assets to exit bankruptcy protection under government ownership.
The sale of substantially all of its assets to NGMCO, Inc., an entity funded by the U.S. Department of the Treasury.
In connection with the closing of the sale transaction, NGMCO will change its name to General Motors Co. and continue to operate under GM’s corporate and sub brands.
Under the deal, ‘New GM’ will operate the best parts of the old company, including its Chevrolet and Cadillac brands, with a less expensive workforce, smaller dealer network, and much less debt.
The rest of the company will be liquidated.
G.M.’s chief executive of three months, Fritz Henderson, is expected to hold that position in the new company. The Obama administration has already designated several directors for the new G.M., including Edward Whitacre, AT&T’s former chief executive, as chairman. The company will be represented on an interim basis by Cadwalader, Wickersham & Taft, the law firm that advised the auto task force.
Old G.M. will stay in bankruptcy, overseen by the company’s current chief restructuring officer, Albert A. Koch of the turnaround firm AlixPartners.
During the three days of lengthy oral arguments and testimony, GM tried to convince Gerber that the deal with U.S. Treasury-funded Vehicle Acquisition Holdings LLC was the best alternative before the company, other than liquidation.
Under the deal, GM would sell its most desirable assets, including its well-known Chevrolet and Cadillac brands, to a new company owned largely by the U.S. and Canadian governments and a health care trust for the United Automobile Workers union. It’s expected the new company, which will still be called General Motors, will be taken public in 2010.
The sale will preserve hundreds of thousands of GM jobs in North America, and around the world, and bolster a reeling network of auto industry suppliers.
Under the plan, U.S. taxpayers would end up owning 60 percent of the new GM, with other stakes held by Canadian governments, bondholders and the United Auto Workers union.
Holders of $27 billion in GM bonds would get stock in the reorganized company, as would a union-controlled trust fund that would take stock rather than the $20 billion in cash it had been owed to pay future retiree health care costs. Those 650,000 retirees would have their coverage reduced.
GM plans to close more than a dozen factories, drop U.S. brands and close up to 40 percent of its network of 6,000 dealerships.
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