Old GM comes to end of road
Liquidation plan OK expected; includes pollution cleanup
New York— The end is near for the remnants of the 102-year-old General Motors Corp.
A federal bankruptcy judge is expected to give final approval today to the liquidation plan of the "Old GM," known officially as Motors Liquidation Co. It will mean some compensation for bondholders who lost billions in the bankruptcy and clear the way for a massive environmental reclamation program at polluted GM sites.
"It's time to bury the past and it put it away, said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor and son of a former GM president.
"As long as an old GM is around, it's going to cause a memory of a past era. The symbolism is really quite important. We need to move on with the future."
Today's hearing before Judge Robert Gerber comes almost 21 months since the Detroit automaker filed for bankruptcy in the same court, as part of a $50 billion government bailout and restructuring.
The new GM was created from some of the "good" assets of the old GM, as a government-sponsored company. It emerged in July 2009 after just 40 days in bankruptcy.
Because the automaker uses the same facilities, trademarks and websites, most people have little idea that today's GM is less than 2 years old as a new company. Its stock was publicly traded for the first time in November.
The new GM was able to leave behind tens of billions of dollars in liabilities from asbestos claims, environmental claims and unpaid bills and loans.
Before approving the liquidation plan, Gerber must first hear objections. Outstanding issues include the extent of environmental cleanup in upstate New York, objections lodged by major hedge funds owning former GM Nova Scotia bonds and claims by GM's former joint venture with Toyota in Fremont, Calif.
In December, the old GM reached a deal with Indiana, Ohio, Iowa and Wisconsin and agreed to use $25 million to clean six priority sites in those states.
Creditors get $5B in stock
With the judge's approval, bondholders of the old GM and other creditors will receive a 10 percent stake in the new GM, known as General Motors Co. Unsecured creditors overwhelmingly approved the liquidation plan last month.
Under the liquidation plan, creditors will receive 150 million shares of new GM stock, worth about $5 billion.
If the plan is approved today, Old GM plans to distribute about 70 percent of the shares to creditors — where there is no dispute over how much they are owed — around April 1.
That group includes bondholders who lost more than $20 billion when the company defaulted on its loans.
The remainder of shares will be distributed in a few months as the final claims are resolved. Creditors are also entitled to warrants to buy shares equal to 15 percent of the shares in the new GM.
Creditors, in a few months, could get another 2 percent stake in GM if total claims top $35 billion.
Over the past two years, many Wall Street traders have bought GM bonds as a way of investing in the new GM.
Old GM investors and creditors "have a big stake in new GM's turnaround — since the higher the stock price is, the more they will recover," said Cole, who is an Old GM bondholder.
Factories still being sold
For the first year after bankruptcy, about two dozen people — operating out of temporary space at the Renaissance Center in Detroit— worked to sell off plants, equipment and other Old GM assets.
The remaining employees moved to a smaller office in Birmingham a few months ago.
Old GM is still working to sell off former GM factories and to sell a former property in West Mifflin, Pa.
It found uses for some properties, including a former GM plant in Delaware that was sold to electric vehicle startup Fisker Automotive. It sold a former GM plant in Pontiac that will house an $80 million movie studio — Raleigh Michigan Studios — that's opening this spring.
Tim Yost, a spokesman for the old company, said it will take a few months for Motors Liquidation to completely go out of business.
The company said in a filing it won't exist beyond Dec. 15, at the latest.
