The judge also rejected arguments that the Treasury illegally used strong-arm tactics to force the restructuring through the courts and past creditors who had the right to greater compensation.
“The U.S. Treasury, in making hard decisions about where to spend its money and make New GM as viable as possible, made business decisions that it was entitled to make,” he wrote.
The Treasury has committed to provide GM with $60 billion in financing to help it emerge as a profitable company again. For that unprecedented amount, the Treasury would receive a 61 percent stake in the company. Canada would gain a 12 percent share for chipping in about $10 billion, and GM’s autoworkers union would receive 17.5 percent in exchange for some concessions.
Bondholders and the rest of the company’s creditors would get the remaining 10 percent, as well as proceeds from the liquidation of GM assets that are not sold to the Treasury. They also would receive warrants to obtain another 15 percent share of the new GM once it starts issuing stock again. White House and GM executives hope that will be sometime next year.
The judge’s decision was appealed Monday on only one minor point — whether GM should be required to honor product-liability claims that predate the sale of the company to the Treasury. Lawyers representing accident victims appealing the decision said they do not intend to try to delay the sale of GM to the government by the end of the week.
The bankruptcy judge provided a four-day stay of his order, giving those objecting to the decision only hours to take their case to higher courts. A similar sale of Chrysler out of bankruptcy, which was approved by the same court barely a month ago, was appealed all the way to the Supreme Court.
Under the deal, a “new GM” would emerge from bankruptcy with all of its most valuable and profitable operations, including the Chevrolet and Cadillac brands, while being shorn of most of its huge debts. It would have a smaller, more efficient work force and network of dealers.
Steve Rattner, head of the White House auto task force, said the company will have fewer global operations after selling its Opel and Vauxhall units, and will pare its management by another 35 percent to become even “leaner and meaner.”