The General Motors Chapter 11 sale of the assets of automobile manufacturer General Motors and some of its subsidiaries was implemented through section 363 of Chapter 11, Title 11, United States Code in the United States Bankruptcy Court for the Southern District of New York. The United States government-endorsed sale enabled the NGMCO Inc.[1] ("New GM") to purchase the continuing operational assets of the old GM.[2][3][4] Normal operations, including employee compensation, warranties, and other customer service were uninterrupted during the bankruptcy proceedings.[2] Operations outside of the United States were not included in the court filing.[2]
The company received $33 billion in debtor-in-possession financing to complete the process.[5] GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009 at approximately 8:00 am EST. June 1, 2009 was the deadline to supply an acceptable viability plan to the U.S. Treasury. The filing reported US$82.29 billion in assets and US$172.81 billion in debt.[6][7] [8][9][10]
After the Chapter 11 filing, effective Monday, June 8, 2009, GM was removed from the Dow Jones Industrial Average and replaced by Cisco Systems. From Tuesday 2 June, old GM stock has traded Over the Counter (Pink Sheets/OTCBB), initially under the symbol GMGMQ[11] and currently under the symbol MTLQQ.
On July 10, 2009, a new entity completed the purchase of continuing operations, assets and trademarks of GM as a part of the 'pre-packaged' Chapter 11 reorganization.[12][13] As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history. The Chapter 11 filing was the fourth-largest in U.S. history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc.[14] A new entity with the backing of the United States Treasury was formed to acquire profitable assets, under section 363 of the Bankruptcy Code, with the new company planning to issue an initial public offering (IPO) of stock in 2010.[15] The remaining pre-petition creditors claims are paid from the former corporation's assets.[12][15]
Bailouts[edit]
European Loans[edit]
GM received loans from European governments in 2009, and has reduced its ownership stake in European operations as part of its reorganization.[88] As of July 10, 2009, the new GM has over $40 billion in cash, with the company's reorganized liability total of $48.8 billion which includes $24.4 billion to be paid to the Voluntary Employee Beneficiary Association (VEBA) trust, $9 billion to the U.S. and Canadian governments, and $15 billion in liabilities to suppliers and other bills. GM is slated to pay $10 billion to the VEBA trust in December 2009, with the remainder being paid in increments from 2012-19. GM isn't required to make contributions to its pension fund until 2013, but it may elect to if needed, since the company contributed $15.2 billion to its pension fund in 2003. Stock market conditions cause the fund value to fluctuate. In February 2009, GM's combined pension fund had about $85 billion in assets, $56 billion in assets for hourly pensions and $29 billion in assets for salaried pensions.[89]
United States[edit]
Although the Obama administration had initially provided the automaker five years to repay the money in full, in March 2010 GM made more than $2 billion in payments to the U.S. and Canadian governments and promised to pay the full balance of the loan portion by June. The company beat that self-imposed deadline when on April 21, 2010, GM CEO Ed Whitacre, Jr. announced that the company had paid back the entire amount of the U.S. and Canadian government loans, with interest, a total of $8.1 billion. The government still has $2.1 billion invested in preferred shares that pay dividends, plus a 61% share of common equity valued at about $45 billion to the U.S. and another $8.1 billion to Canada. Improved sales of new models are cited as improving the company's cash flow and allowing for the early payments. GM is also investing hundreds of millions in assembly plants in Kansas and Detroit, credited for preserving jobs.[90] A White House report sent to Congress in August 2012 estimated the sale of the remaining G.M. stock acquired by the United States Treasury during the company's bankruptcy will result in a loss of $25.1 billion to the American taxpayer.[91] The total cost to the taxpayer will be determined after the government sells its 26% stake in G.M. and its 74% stake in Ally Financial, formerly known as GMAC, G.M.’s financing arm. The combination of poor market share and sales has resulted in constantly decreasing stock prices. First quarter 2012 traded at $39.48, second at $33.47, third at $32.08, and fourth at $26.55. It is calculated that GM stock needs to be at $53.00 for the government to break even on their investment.[92]
Some Republican congressmen were critical of the statement that GM had repaid the loan from TARP calling it a "lie to the American people". They say the money for the loan repayment came from other bailout funds housed in an escrow account belonging to the company. In a letter from Rep. Darrell Issa (R-CA) and Rep. Jim Jordan (R-OH) to Ed Whitacre, it is called an "attempt to disguise what is merely the exchange of one pool of taxpayer money for another pool of taxpayer money as 'real progress'". Senator Charles E. Grassley, Republican of Iowa called it a government-enabled “TARP money shuffle.”[93][94]
On December 9, 2013, the U.S. sold its final stake in GM at an estimate loss to taxpayers of about $10 billion.[95]
2012 Suit[edit]
In 2012, A trust representing "old" GM's unsecured creditors filed suit in the Southern District of New York against GM over payments made to hedge funds in 2009 in exchange for waiving of claims against GM's Canadian subsidiary. The deal, of which Judge Robert Gerber says he was unaware - despite its disclosure in an SEC filing on the day GM sought Chapter 11 protection - could prompt a reopening of the 2009 case.[96]
See also[edit]
GM (General Motors) and the Evolution of Mass Surveillance (Peripheral Intelligence)
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