GM won't get federal aid extension

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By Patrice Hill

The White House turned up the heat in the General Motors bankruptcy case Wednesday, saying the government will not provide further funds to support GM's reorganization beyond July 10.

The prospect of the loss of government funding - which has been the only thing keeping GM from liquidation for months - provides a powerful incentive for the court to quickly approve the sale of GM's profitable businesses to the U.S. government as the bankrupt automaker has requested.

"We have no intention to further fund this company" if the court does not approve the sale by July 10, Harry Wilson, a member of the White House's auto task force, said in testimony before U.S. bankruptcy Judge Robert Gerber in New York. "That has been our position."

The White House and GM, in stepping up pressure on the bankruptcy court, have repeatedly pointed to the record-fast approval of Chrysler's sale by a judge of the same court after only 30 days in bankruptcy. The White House is now aiming for approval of the much larger GM transaction within 40 days of filing, Mr. Wilson said.

Even the swift bankruptcy reorganization the administration is seeking will cost U.S. and Canadian taxpayers about $60 billion. Prolonging the bankruptcy for months as objections pile up from dealers, states and bondholders would only add to the cost. GM itself estimated that a traditional, prolonged bankruptcy proceeding could take from months to years and would cost the government more than $100 billion.

If the court agrees to the sale of most of GM to the Treasury, the U.S. government would become 60 percent owner of the company, with the Canadian government getting a 12.5 percent share. GM's autoworkers' union would gain a 17.5 percent share and bondholders would get a 10 percent share under the reorganization scheme.

Mr. Wilson said the administration hopes to recoup some of the cost of the GM bailout by selling its stake through an initial stock offering some time next year.

White House officials from President Obama on down have stressed that they believe the only way they can save GM is if it quickly emerges from bankruptcy. Mr. Wilson testified that, after talking to bankruptcy experts, the task force concluded that GM could not survive a prolonged reorganization.

"We were trying to do it in 30 to 40 days," he told the court, rather than the 60- to 90-day schedule that was widely reported when GM filed for bankruptcy on June 1.

GM Chief Executive Officer Frederick A. "Fritz" Henderson told the court that the company would be forced to liquidate and go out of business if Treasury stops financing the bankruptcy reorganization on July 10.

"We are concerned about the business status of the company in a bankruptcy," he told the court. Mr. Henderson also disclosed that it was White House task force head Steven Rattner who asked his predecessor, Rick Wagoner, to step down at a face-to-face meeting in March.

Other officials testified that the cost of winding down and selling off the unprofitable units of GM is also mounting and will be about $1.25 billion - more than the $950 million the Treasury originally budgeted.

Some of the shuttered plants and facilities cannot be sold because of environmental contamination, said GM restructuring chief Albert Koch. He put the cost of repairing environmental damage at company sites at $530 million.