U.S. Involvement in GM Won't End With Bankruptcy
Thursday, May 28, 2009
The government would retain significant control over the restructured General Motors under an Obama administration plan that would allow U.S. officials to directly name or influence the appointments of the vast majority of a new 13-member board that would oversee the company, sources familiar with the discussions said.
The plan calls for federal officials to directly appoint five or six members to the board after GM emerges from its expected bankruptcy, the sources said. Another six would roll over from GM's existing board, but even these directors would reflect the government's influence since GM is reconstituting its board under government direction.
The United Auto Workers' health-care trust would name one director to the company board, the sources said, adding that Canada is likely to appoint a board seat as well.
Details of the shape of GM's new board emerged yesterday as the Obama administration continues its sweeping efforts to revive the nation's ailing auto industry, on the same day that a U.S. bankruptcy judge began a highly anticipated hearing on the sale of Chrysler to Italian automaker Fiat. General Motors could face a similar bankruptcy filing as early as Monday, and some paperwork could be submitted this weekend.
While President Obama has said he has no interest in running GM or Chrysler, into which the government has poured more than $20 billion combined, he has said officials have an interest in protecting the taxpayers' investment. Nevertheless, federal officials are preparing to be deeply involved in the companies well after they emerge from their respective bankruptcies.
"I don't think that we should micromanage," Obama has said. "But I think that like any investor, the American taxpayer has a right to scrutinize what's being proposed and make sure that their money is not just being thrown down the drain."
GM moved closer to bankruptcy protection yesterday as bondholders snubbed the company's request to swap most of the $27 billion they are owed for a small amount of stock.
Hours later, Judge Arthur J. Gonzalez, who is overseeing the Chrysler case, began hearing arguments on Chrysler's motion to approve the sale of most of its assets to a new entity jointly owned by Fiat, the UAW and the U.S. and Canadian governments.
More than 300 objections have been filed by a long list of Chrysler's lenders, dealers, retirees, suppliers and others. Yesterday's hearing in a Manhattan courtroom lasted more than 10 hours, ending around 8 p.m. If the judge approves the sale, which he is widely expected to do, the government-orchestrated transaction would take place before June 15, meeting the Obama administration's goal of a quick and "surgical" reorganization of the iconic manufacturer.
In one of the more tense moments during the court proceedings, Robert Manzo, a restructuring expert hired by Chrysler late last year, was questioned by an attorney for some of the automaker's first lien lenders regarding the contents of e-mails he exchanged with Matthew Feldman, a member of the Treasury Department's auto task force. The task force is charged with overseeing the restructuring of Chrysler and GM.
In the e-mails, which were exchanged the day before Chrysler's April 30 bankruptcy filing, Manzo offered to try to come up with a way to close the gap between the government's offer to repay lenders at a reduced rate and what some lenders were demanding.
But Feldman, a prominent bankruptcy lawyer and a partner at Wilkie, Farr & Gallagher who was tapped by Treasury this year, responded: "It's over. . . . I am not talking to you."