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Bankruptcy judge approves plan for a smaller GM

Groups opposed to the decision have until Thursday to appeal it.

By Ron SchererStaff writer / July 6, 2009

General Motors employees and retirees protested outside bankruptcy court in New York on June 30. The protesters, from Ohio and Mississippi, were concerned that when GM emerges from bankruptcy, the company would not be required to pay pensions and healthcare for some retirees.

Seth Wenig/AP

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New York

With the decision by a US bankruptcy judge that General Motors can sell most of its assets to a new company, the American automaker can now start to figure out how to put a Chevrolet, Buick, Cadillac, or GMC in every garage.

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The garage, however, will not have a Hummer, Saturn, or Pontiac. Instead, those are “old assets” that GM will either sell or close.

What all this means is that when GM emerges from its speedy trip through bankruptcy court, which can happen after any appeals, it will be a smaller company. Scores of GM plants will be shut down. The company has already said it plans another round of white-collar layoffs, and dealerships with low sales volume have already been told they are out. Moreover, GM, which prides itself on its global nature, will try to sell Saab and a part interest in Opel. [Editor's note: The original version misspelled Opel.]

“It’s losing volume from some big mistakes like Pontiac and Saturn,” says Bruce Belzowski, associate director of the Automotive Analysis Division at the University of Michigan's Transportation Research Institute in Ann Arbor. “They will be smaller in the US.”

The decision by Robert Gerber, the bankruptcy judge, to allow GM to move ahead with its plan was not unexpected, says Mr. Belzowski. GM had the support of the US government, which had pushed the company into bankruptcy. US taxpayers will own about 60.8 percent of the company; the United Auto Workers Medical Benefits Trust about 17.5 percent; and the Canadian and Ontario governments about 11.5 percent. The old GM shareholders will have 10 percent of the company.

The US Treasury has threatened to cut off funding for GM if the company is not out of bankruptcy by July 10. “It shows how important the government support is,” Belzowski says.

Groups opposed to the judge’s decision have until Thursday to appeal it. Those opposed could be some bondholders, perhaps some unions, lawyers representing people suing GM, and maybe consumer groups.

At least one appeal is already in the works, according to the wire services.