NEW YORK - GENERAL Motors' bid to sell its 'good' parts into a new company and emerge from bankruptcy protection began on Tuesday as hundreds of lawyers converged on a Manhattan courthouse.
GM, whose June 1 filing for bankruptcy protection was the fourth-largest in US history, is hoping to avoid a lengthy sale hearing that could drag out the process and postpone its emergence from Chapter 11. Last month, objections from a group of bondholders and others dragged out rival Chrysler LLC's sale hearing for three days.
On Tuesday, GM CEO Fritz Henderson was questioned for several hours by attorneys for the various parties challenging the sale, including bondholders, consumer groups and unions.
Despite US Judge Robert Gerber's urging for the attorneys to keep their arguments concise and to avoid redundancies among their questioning, Tuesday's hearing dragged on as a parade of lawyers made their way up to the podium to question Henderson.
After the hearing, which started more than an hour late and stretched into mid-afternoon without a lunch break, Mr Gerber chastised the attorneys for taking too much time and not being prepared enough.
Under a government-backed deal, General Motors Corp will sell most of its assets to a newly created company, 60 per cent owned by the US government. The Canadian government will get a 12.5 per cent stake while the United Auto Workers union will take a 17.5 per cent share to fund its health care obligations. Unsecured bondholders receive the remaining 10 per cent.
GM hopes to emerge as a leaner company, less burdened by debt and labour costs as it faces a severe recession that has sapped car and truck sales. Automakers, which are due to report June US sales on Wednesday, have seen sales fall 37 per cent over the first five months of the year.
Lawyers, media and other spectators, along with a handful of people who claim they were injured as a result of allegedly defective GM vehicles, gathered outside the US Bankruptcy Court for the Southern District of New York hours before the hearing's scheduled start on Tuesday in a line that wrapped around the building.
Early on in the hearing, Mr Mark Salzberg, an attorney for a group of bondholders, questioned why GM would opt for a sale plan instead of a restructuring plan, charging that the automaker took that route to make it harder for its creditors to negotiate with the company.
Besides the bondholders, a trio of labour unions who claim that their retirees stand to lose health care benefits are also trying to block the sale. Unlike the UAW, which brokered a deal for a stake in the company, those unions say they won't have anything to pay for retiree health care. -- AP
