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Old G.M. Being Sold for Parts

August 31, 2010
 

Old G.M. Being Sold for Parts

The new General Motors appears to be thriving.

Having emerged from bankruptcy, the revitalized company has recently reported $1.3 billion in quarterly earnings, paraded out a new chief executive and filed an initial public offering that seeks to pay back a portion of its approximately $60 billion in government loans.

But the old G.M. — a grim collection of shuttered auto plants, vacant office space and toxic industrial sites — is one step closer to extinction.

The fate that awaits the old G.M., officially the Motors Liquidation Company, the entity that houses the unwanted assets that were cleaved off in General Motors’ bankruptcy, was spelled out in its reorganization plan filed late Tuesday in federal bankruptcy court in Manhattan.

The complex plan splits the old G.M. into four trusts, including one financed by $536 million in existing loans from the federal government that will go toward cleaning up auto plants and other properties still owned by Motors Liquidation. The trust will work with 14 states and the Environmental Protection Agency to provide cleanup money to these sites. Another $300 million is earmarked for property taxes, plant security and other expenses.

“A significant number of the properties owned by Motors Liquidation Company are old industrial sites,” said Ted Stenger, an executive at Motors Liquidation and managing director at AlixPartners, the turnaround and consulting firm. “It is nearly impossible to redevelop such properties for productive, job-creating purposes unless environmental remediation is addressed.”

Another trust will handle the claims of the owners of G.M.’s old bonds, which are expected to get 10 percent of the equity in the new G.M. when it goes public later this year, plus warrants to buy additional shares. A recent report by the fixed-income research firm Gimme Credit estimates that bondholders will most likely end up with about 20 percent of the new G.M.

Two other trusts will handle litigation related to the old G.M., including asbestos-related claims. After the plan is approved — the court is expected to sign off on it early next year — the old G.M. will disappear.

“While ‘new G.M.’ is, rightfully, getting a lot of positive attention these days, what’s been accomplished here at so-called ‘old G.M.’ — including work done well before the bankruptcy — is historic in its own right,” said Al Koch, Motors Liquidation’s chief executive and a managing director at AlixPartners.

Mr. Koch said that he expected most of the old G.M. assets would be sold or transferred within four years, while most of the environmental cleanup at the sites — some of which are contaminated with chemicals called PCBs and other toxins — would be completed within a decade.

The process of selling the old G.M. plants and other properties — 50 million square feet of industrial manufacturing space at 127 locations across 14 states — has been slow going.

So far, Motors Liquidation has raised $125 million through asset sales. It has offloaded three former factories: a Wilmington, Del., assembly plant to Fisker Automotive, the startup hybrid car maker; a Pontiac, Mich., factory to Raleigh Studios, an independent film company that is making the space into a movie studio; and a Strasbourg, France, transmission plant, sold back to the new G.M. for one euro.

Another 17 sites are in discussions to be sold, Mr. Koch said. Other properties have received inquiries from all types of buyers. For instance, an investor group has expressed interest in repurposing the historic Buick City auto manufacturing complex near Flint, Mich., into a shipping hub for soybeans.

There have been recent setbacks. J. D. Norman Industries, a metal components manufacturer in Addison, Ill., is near a deal to acquire a former G.M. stamping plant in Indianapolis, but the local union there last week refused to vote on a new contract that would reduce employees’ wages.

Other abandoned plants are being preyed upon by thieves. The police in Flint, Mich., are investigating the theft of copper, said to be worth more than $1 million, from a vacant factory there. Last month, burglars fired shots at the police while making their getaway from the Powertrain Flint North plant.

“This is a major-league problem,” said Robert J. Pickell, the sheriff of Genesee County, Mich., in an interview. “These people are robbing G.M. blind.”

 

 

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