GM close to bankruptcy exit, sale to government (2nd Roundup)

Jul 9, 2009, 20:44 GMT

New York - US carmaker General Motors could exit bankruptcy in record time and come under the control of the US government by the end of this week, as a Thursday deadline for challenges expired.

A New York judge on Sunday night approved GM's plan to sell its best assets into a new company that would be majority owned by the US Treasury. The decision put GM on a path to exit bankruptcy less than two months after seeking court protection on June 1 - a speed that has surprised most experts.

But a group of Arizona accident victims filed a last-minute appeal to block the sale Thursday, fearing that a post-bankruptcy GM will not be liable for their damages claims. Judge Robert Gerber had set a noon (1600 GMT) deadline for all appeals to be filed.

The Wall Street Journal reported the court appeal had little chance of success and was unlikely to stop GM's sale to the government. GM said it would hold a press conference Friday morning, which could set the stage for its formal exit from bankruptcy.

US President Barack Obama's administration has set its own ultimatum of Friday for the sale to go through, threatening to otherwise pull 30 billion dollars in funding.

The Treasury is set to get a 60-per-cent stake in GM in exchange for the loans. The Canadian government, which has also provided billions of dollars, will get 12 per cent. A union health care trust will take 17.5 per cent and bondholders will get the remaining 10 per cent.

GM's reorganization plan has been challenged by some bondholders, dealerships and labour unions that hoped for a better deal through liquidation. But all have so far been blocked by Judge Gerber, who warned Sunday that GM's collapse would be a 'disastrous result' for the entire auto community.

Once the world's largest carmaker, GM will emerge from the bankruptcy process a much smaller company. The Detroit manufacturer will leave behind a series of brands that are being sold off or liquidated, including Pontiac, Saturn, Hummer, Opel and Saab.

The Obama administration meanwhile was also mulling what kind of pension to give ousted GM chief executive Rick Wagoner, who was forced out in March as part of the government's massive bail-out of the troubled manufacturer.

Wagoner is retained on a nominal one-dollar-a-year salary, but now Washington must decide what sort of exit package to offer the 56- year-old former boss.

Some media reports have put the figure Wagoner is contractually entitled to at up to 20 million dollars, making it a tricky political decision for an administration hit by a public outcry at handouts of taxpayers' dollars.

No decision has yet been made on his package, according to Treasury officials. Obama has in the past expressed outrage over bonuses and excessive payments to the managers of failing businesses in the current economic crisis.