Thursday, December 6, 2012

Interesting legal developments concerning General Motors

Regular readers will know my (vitriolic) views on the bailout of the US auto industry by the federal government - I've written about it several times before.  Briefly, the Obama administration systematically trashed the rule of law and juridical precedent in its handling of the bailout.  For that reason, I vowed back in 2009 that I'd never buy another new GM or Chrysler vehicle for so long as the bailout conditions remain in force.

Fortunately, that may not be for long as far as GM's concerned.  The Washington Free Beacon reports:

A New York federal judge may rule imminently on a case that could reverse the General Motors (GM) bailout and send the company back into bankruptcy, according to sources close to the case.

At issue is a backroom deal hatched by GM to fulfill the Obama administration’s demand for a quick bankruptcy, draining the automaker of nearly all of its cash on hand and leaving it in worse shape than it was when it collapsed in 2009.

One condition of GM’s bailout was to shore up its overseas subsidiaries. On the eve of entering bankruptcy, the company cut a $367 million “lock-up agreement” with several major hedge funds to prevent GM Canada from failing. The agreement ensured that GM could spin-off its liabilities to “old GM,” while using a multi-billion dollar bailout to create a new company.

. . .

“The judge has made it very clear that he is greatly dissatisfied with the process,” one analyst told the Washington Free Beacon in October. “He’s basically implying that GM hid it from him and that reopening the sale is a possibility.”

If Gerber takes that course the company could be forced to return the $30 billion taxpayer bailout that it received through the course of bankruptcy, on top of the new liabilities.

“It’s nice to see that GM is profitable again, but if all the liabilities come back to roost, short that stock,” the bankruptcy expert said.

. . .

“This has tremendous implications for future of American business and bankruptcy precedent,” he said. “It means more than just GM—this is the rule of law and how creditors are treated in the United States legal system.”

There's more at the link.

I most sincerely hope that Judge Gerber throws out the whole deal, and reverses the bailout.  It should never have happened in the first place.  Thanks to the egregious disregard for law, truth and honesty displayed by the Obama administration, GM's top management and others involved, we may get another chance to ensure it never happens again . . . a prospect devoutly to be wished!


1 comment:

Well Seasoned Fool said...

With the exception of a few GM models (Suburban, Corvette) they make a poor product. Let them hit bottom and come back leaner and better. Crysler products are worse. They do great designs then see how cheap they can make them. Still can't build a decent transmission. Let the market decide.