Working through the weekend, Judge Robert Gerber announced his approval of the proposed GM Bankruptcy Plan yesterday.  With this announcement, consumers may feel better about purchasing a GM car with their Cash for Clunkers rebate monies.  According to Judge Robert Gerber the plan was the only way to preserve GM’s business.  The plan will now allow GM to create a new company minus a truckload of debt.

According to Brian Pasch, CEO of the Pasch Consulting Group, who operates this popular consumer website following the Cash for Clunkers bill:

“From data collected on www.cashforclunkersfacts.com, Chevrolet cars and trucks are the 4th most popular brand on consumers minds who qualify for a Car Allowance Rebate System (CARS) credit. (see chart)  From consumer feedback we believe that interest in GM vehicles will increase once the public has knowledge that their bankruptcy plan approval.  The news may settle some fears that the company would not be able to stand behind a new car that a consumer would purchase starting July 24, 2009.”

GM Bankruptcy Leadership

Fritz Henderson will remain chief executive officer. It is our belief  that it will be a difficult challenge for Henderson to rebuild the GM brand and consumer confidence in the company’s future.  Since the  Department of Treasury owns 60% of the company, it would make common sense that this cloud be lifted before the CARS rebate program starts on July 24, 2009.  GM can now leverage the CARS incentives.  They will first have to fine tune their consumer pitch explaining how the bankruptcy process will allow GM to emerge a stronger and better operated company.

According to the official press release: “A healthy domestic auto industry remains vital to the global economy and we deeply appreciate the support the U.S., Canadian and Ontario governments and taxpayers have given GM, and the sacrifices that have been made by so many.  This has been an especially challenging period, and we’ve had to make very difficult decisions to address some of the issues that have plagued our business for decades.  Now it’s our responsibility to fix this business and place the company on a clear path to success without delay,” said GM CEO Fritz Henderson.

GM Bankruptcy Press Release

Here is the full press release as posted on the GM media website.  Download GM Press Release

NEW YORK – General Motors achieved another milestone in its reinvention last night when Judge Robert E. Gerber of the U.S. Bankruptcy Court for the Southern District of New York approved the sale of substantially all of General Motors Corporation’s assets to NGMCO, Inc., an entity funded by the U.S. Department of the Treasury.  In connection with the closing of the sale transaction, NGMCO, Inc. will change its name to General Motors Company and continue to operate under GM’s historic corporate and sub brands.  The approval marks another step toward the launch of an independent new GM.

The new company will acquire GM’s strongest operations and will have a competitive operating cost structure, partly as a result of recent agreements with the United Auto Workers (UAW) and Canadian Auto Workers (CAW).

The new GM will have lower leverage and a stronger balance sheet, which when combined with a lower break-even point, will allow it to reduce its risk, operate profitably at much lower volume levels, and to reinvest in the business in the key areas of advanced technology and product development.  GM’s subsidiaries outside the United States will be acquired by the new company and are expected to continue to operate without interruption.

The new GM will be headquartered in Detroit and will be led by Fritz Henderson as president and chief executive officer and Edward E. Whitacre, Jr. as chairman of the board of directors. 

“A healthy domestic auto industry remains vital to the global economy and we deeply appreciate the support the U.S., Canadian and Ontario governments and taxpayers have given GM, and the sacrifices that have been made by so many.  This has been an especially challenging period, and we’ve had to make very difficult decisions to address some of the issues that have plagued our business for decades.  Now it’s our responsibility to fix this business and place the company on a clear path to success without delay,” said Henderson.

The new GM’s common stock will be owned by:

·         U.S. Department of the Treasury: 60.8 percent

·         UAW Retiree Medical Benefits Trust: 17.5 percent

·         Canada and Ontario governments: 11.7 percent

·         The old GM: 10 percent

Additionally, the old GM and the UAW Retiree Medical Benefits Trust will hold warrants that are exercisable for 15 percent and 2.5 percent of the interests in the new GM, respectively.

The UAW Retiree Medical Benefits Trust and the Canadian government each may nominate one member to serve on the board of the new GM. The retiree benefits trust has selected seasoned auto industry analyst Stephen Girsky.  Also selected to serve on the board of directors of the new GM are six current members of the General Motors Corporation board, including Erroll Davis, Neville Isdell, Kent Kresa, Philip Laskawy, Kathryn Marinello and Fritz Henderson.  The Canadian government representative and four additional board members to be identified by the U.S. Treasury will be announced at a later date.

Judge Gerber’s order includes a four-day stay before closing of the sale can occur.  However, GM expects the sale to close in the near future.  The new GM’s business is expected to be immediately operational and fully competitive, with an exciting line of new products, a smaller, more focused brand portfolio and the rationalization of its dealer network well underway.  Current GM employees will be offered positions by the new company. 

In connection with the closing, the current General Motors Corporation will change its name to Motors Liquidation Company.  Retained assets will be wound down or sold.  A new board of directors will oversee that process and the liquidation of the company under the supervision of the Bankruptcy Court. 

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