GM chief says company needs quick bankruptcy OK
June 30, 2009
GM chief says company needs quick bankruptcy OK
BY TIM HIGGINS
FREE PRESS BUSINESS WRITER
Updated at 8:45 p.m.
NEW YORK — During about five hours of questioning today in a hot, crowded Manhattan courthouse, General Motors Corp. Chief Executive Officer Fritz Henderson said the automaker “would liquidate” if it does not get permission by July 10 to sell its desirable assets to create a new GM.
GM, which filed for bankruptcy June 1, is trying to use a part of the bankruptcy code that would allow the automaker to restructure quickly by selling its good assets to a new company while less desirable assets remain in bankruptcy. Using that method, Chrysler Group LLC emerged from bankruptcy in 41 days.
The hearing, which is one of the final hurdles to the creation of the new GM, could last for several days.
Henderson acknowledged during the hearing that the $950 million set aside to wind down the old GM might not be enough. “It may be short to a certain degree,” he said.
The U.S. government has given GM more than $19 billion so far to restructure, and GM critics tried to assess in the hearing how involved the government has been in making decisions about GM’s future, an issue that has become politically sensitive.
Some of the sharpest questioning of Henderson came from the lawyer representing thousands of non-UAW union members who had worked for GM.
Outside the federal courthouse in lower Manhattan, dozens of IUE-CWA members protested, chanting: “Save our benefits!”
Inside courtroom No. 617, Tom Kennedy, the lawyer for GM retirees represented by non-UAW unions — including IUE-CWA, International Union of Operating Engineers and United Steelworkers — spent nearly an hour drilling Henderson about why the company’s bankruptcy plan essentially will leave unfunded, according to court records, health care obligations for about 50,000 retirees and dependents.
Asked if he expected the retiree health care benefits to be dropped during the bankruptcy process, Henderson responded: “My expectation is that they would likely do that.”
It’s a different situation, however, for the UAW, which secured a deal for its members to receive retiree health care benefits paid for through a special trust set up to handle the obligations.
Henderson said the bankruptcy plan allows GM to drop the IUE-CWA because basically no active GM workers currently are represented by the union. Because it does not have active IUE-CWA employees, he explained, the new GM did not need to assume the retiree health care liabilities.
Kennedy spent time trying to compare how GM was treating its retired executives versus IUE-CWA retirees. He noted an e-mail Henderson sent to the White House auto task force’s Steven Rattner, lobbying for keeping executive retirement benefits.
Kennedy asked if Henderson sent a similar e-mail regarding IUE-CWA benefits.
Henderson responded that GM wanted to get IUE-CWA retirement health care benefits in line with what salaried retirees received.
The court and GM have received about 850 written objections to GM’s bankruptcy plan, according to court files.
In court records, GM lawyers acknowledged that hundreds of parties have filed objections to GM’s bankruptcy plan but said nobody has proposed a better plan.
“No party or person has expressed an interest or proposed a higher or better offer or any other financing proposal,” GM lawyers said in recent court filings
Furthermore, GM lawyers argued in court records that no party has argued against GM’s contention that the only alternative is liquidation or the “draconian consequences to employees, suppliers, dealers, communities and the overall U.S. economy if the” bankruptcy plan “is not consummated.”
GM’s lawyers stated that “approximately 99% of all dealers” have agreed to continue doing business with GM or have agreed to wind-down agreements that will help GM cull its bloated dealership ranks.
Some of the most vocal opponents to GM’s plan have been bondholders, many of whom are small investors.
GM dismissed their arguments that they are not being treated fairly.
“Most of the objections filed by the debtors’ bondholders are nothing more than emotional reactions to the reality that unsecured creditors of the debtors will experience an economic loss,” GM said in court filings.
“Although the debtors are sympathetic to the economic circumstances facing bondholders, the bondholder objections present no legitimate challenge,” the company added.
Outside the courthouse, Terry Cole of Missouri sat in his wheelchair to protest GM’s plan to shed vehicle liability.
He said the seat-heater in his Cadillac Escalade severely burned him, making it hard for him to sit in a vehicle for long periods of time. “We’re concerned about GM not holding up its obligations,” Cole said.
The 9:45 a.m. hearing began about an hour late because the courtroom’s speaker system did not work properly. The judge moved the hearing to another courtroom.
U.S. Bankruptcy Judge Robert Gerber chastised the lawyers for taking too much time and told them to ask better questions. The hearing is slated to reconvene early Wednesday.