• 
• CLASS
• JOBS
• AUTO
• HOMES

GM seeks court approval to become "new" company

NEW YORK (AP) — General Motor’s bid to sell its "good“ parts into a new company and emerge from bankruptcy protection began Tuesday as hundreds of lawyers converged on a Manhattan courthouse.

GM, whose June 1 filing for bankruptcy protection was the fourth-largest in U.S. 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.

When asked about the current condition of GM, Henderson testified that the automaker’s June sales were "slightly better than expected“ excluding fleet sales, which he partly attributed to the company’s progress toward an exit from Chapter 11.

Under a government-backed deal, General Motors Corp. will sell most of its assets to a newly created company, 60 percent owned by the U.S. government. The Canadian government will get a 12.5 percent stake while the United Auto Workers union will take a 17.5 percent share to fund its health care obligations. Unsecured bondholders receive the remaining 10 percent.

Existing GM shareholders are expected to be wiped out.

The remaining pieces of the company, including some closed plants, will become the "Old GM“ and be liquidated.

GM hopes to emerge as a leaner company, less burdened by debt and labor costs as it faces a severe recession that has sapped car and truck sales. Automakers, which are due to report June U.S. sales on Wednesday, have seen sales fall 37 percent over the first five months of the year.

Lawyers, media and other spectators gathered outside the U.S. Bankruptcy Court for the Southern District of New York hours before the hearing’s scheduled start Tuesday. The line wrapped around the building amid a crowd of picketing GM retirees.

Early on in the hearing, 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.

But Harvey Miller, an attorney from GM, questioned the validity of the bondholder group’s challenge, noting that it only has three members, one of which bought his bonds for just 2 cents on the dollar, while the other two spent no more than 20 cents on the dollar for theirs.

Besides the bondholders, a trio of labor 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.