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Treasury Department Continues Maneuvering to Get General Motors out of Bankruptcy Court

A series of compromises are designed to quash objections and allow the New GM to emerge by summer's end.

by on Jun.29, 2009

Treasury Auto Task Force, Ron Bloom

How other groups fare as the case moves forward appears to be directly related to the threat they pose to the Treasury plan.

As the summer heats up, so is opposition to the proposed reorganization of GM by multiple groups who claim they are not being treated fairly. And since for every action there is a reaction, The U.S. Treasury Department is stepping up its maneuvering to keep its GM plan on track.

The latest such choreography saw trial lawyers receive a handsome sop over the weekend when GM agreed to allow product liability suits to continue on pre-bankruptcy GM vehicles, as TDB has reported.

Not only are the trial lawyers large contributors to the Democratic Party, who have resisted reforms to a system that sees most of the victim’s compensation redistributed to lawyers’ fees, but they represented a potentially massive roadblock to a quick emergence from bankruptcy for GM.

How other groups affected by GM fare as the case moves forward appears to be directly related to the threat they pose to the Treasury plan to do a so called section 363 sale that will preserve some of GM instead of liquidating all of it.

As in the Chrysler case, the strongest argument for this government plan is that more is saved and more – but not all — parties benefit from a quick resumption of business and the trimming back or elimination of as many liabilities as possible from the New GM. The argument also leaves room, as has now been demonstrated, for some political deals that change the terms of the two cases.

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In an earlier move less than three weeks after GM declared bankruptcy, Treasury rejected the request for additional funds for suppliers who are strapped because of the GM meltdown and cessation of production at virtually all of its North American plants.