Bankruptcy judge approves plan for a smaller GM
Groups opposed to the decision have until Thursday to appeal it.
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The general public often thinks “something is wrong about such a quick sale,” says David Neier, a bankruptcy lawyer at the law firm Winston & Strawn in New York. However, he says, the courts have generally granted relief to the bankrupt company when that is the objection.Skip to next paragraph
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In fact, the appeals courts may struggle more over the issue of liability, he says. “For example, if someone buys a Chevy, has an accident, and maintains there is a defect in the car, whose claim should the lawsuit be if the accident happens after the bankruptcy takes place?” he explains.
In the case of Chrysler, which had some of the same appeals in its bankruptcy case, the courts ruled that any liability claims would be the responsibility of the old company.
The Chrysler appeals sped through the courts. The appeals court made its decision in a week, Mr. Neier says, and the Supreme Court in three days.
“This may have a similar time frame, even though it’s 10 times the size,” says Neier, a partner in the law firm.
The new GM, which for legal purposes will be known as NGMCO Inc., tried to put a positive spin on the judge's decision, calling it “another milestone in its reinvention.”
According to the company, it will have less debt and a stronger balance sheet. It also says it now has a lower break-even point, which will allow it to operate profitably at much lower volume levels.
For example, she says, GM is shedding a lot of its legacy costs, such as its healthcare commitment to retirees. The cost cutting, she says, will be vital: GM has a 20 to 25 percent market share, but it's set up to be profitable at 30 to 35 percent.
“The challenge now is to put up or shut up,” she says. “[GM] can’t point to anything else.”
GM’s opportunity, Ms. Lindland believes, is to provide vehicles to a public that has put off making big purchases for the past several years: “There is a real chance to bring in new buyers if you have the right products and the right dealerships and can show the consumer you have your act together.”
• This story was updated at 4:15 p.m. on July 6.