GM Bondholders Try To Block Firm's Sale

NEW YORK, July 2 -- One of the main challengers to the proposed sale of General Motors on Thursday urged a federal bankruptcy judge to act as a check on an "overbearing" government and reject the restructuring plan pursued by the Obama administration.

The government, pushing the limits of its power in stressful economic times, made a "conscious, strategic decision" to circumvent a traditional reorganization plan, said Michael Richman, an attorney for dissident GM bondholders.

His comments came during closing arguments on the third and final day of hearings to approve the sale of the automaker's profitable assets to a new, leaner GM to be 61 percent owned by the federal government.

Judge Robert Gerber adjourned the hearing late Thursday, after three days of marathon oral arguments and testimony. He did not indicate when he would render his decision.

Thursday's proceedings began with Richman suggesting that Harry Wilson, a member of the Treasury Department's auto task force who oversaw the government's daily dealings with GM, had misled the court.

Wilson testified Wednesday that the government would stop funding the automaker if the sale is not approved by July 10. But Richman urged the court to call the government's bluff, saying it was up to the judicial system to act as a check.

The threat that the Obama administration, after pouring billions of dollars of taxpayer funds into the company, would let GM fail simply because it didn't get its way in court is "not credible," Richman said.

In his rebuttal, Harvey Miller, an attorney for GM, said Richman was asking the court to take an "awesome gamble."

"Essentially, the objectors are asking you to play Russian roulette," Miller said.

The automaker and the government are pursuing a restructuring plan that would allow for the quick sale of the automaker's assets while leaving many of the liabilities behind with the "old" GM. They argue that the sale must happen quickly or else consumers may stop buying cars from the company and the assets could lose value.

Richman, who represents three individual bondholders who bought GM bonds at no more than $20 per $1,000 in face value, wants a more traditional reorganization in which his clients would have greater say. He argued that GM's assets were not wasting.

David Jones, an assistant U.S. attorney representing the Treasury, said the government was not sacrificing principles for the sake of speed, and that it was using established law to pursue the GM purchase.

"There is no alternative," Miller said. "It is liquidation or this sale."