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A 'New' GM Will Have Work Cut Out for It

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"That's very good news for GM," said John Paul MacDuffie, associate professor of management at University of Pennsylvania's Wharton School. "To the extent that part of their problem was cost structure, ungainly size and too many brands, this allows them a fresh start . . . and a chance to proclaim that it's a new stage."

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Gerber's decision could face appeals that would slow a deal. Steve Jakubowski, a lawyer representing five product-liability claimants, filed a notice of appeal with the bankruptcy court late Sunday. He said he was prepared to take the case all the way to U.S. Supreme Court on an issue that Gerber acknowledged was ambiguous.

Attorneys had argued that the "new GM" should be responsible for product-liability claims arising from accidents involving GM cars. The issue has galvanized consumer groups, which took their case to the airwaves and Congress. Some plaintiffs showed up in court in wheelchairs. Late last month, the government and GM reached an accord with states' attorneys general that would allow those injured in accidents occurring after the sale to sue the new GM, even if the accidents involve cars manufactured by the "old" GM.

Those appealing could face an uphill battle. Tort claimants and senior creditors in the Chrysler case took their cases to U.S. Supreme Court last month, threatening to delay the sale. Although the justices declined to hear the case, they made clear that their decision, which was not based on the merits of the arguments, affected only the Chrysler dispute.

But while Gerber said in his ruling that the successor liability issues were the "only truly debatable issues in this case," he still sided with the government, saying, "bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve -- to prevent the death of the patient on the operating table."

The new GM would be 61-percent-owned by the federal government, which has committed more than $50 billion to the restructuring. A health-care trust for the United Auto Workers, GM bondholders and the Canadian government, which has also provided funding, would get minority stakes.

The Obama administration has repeatedly said that it does not want to run GM and that it planned to sell its government stake next year. But analysts questioned whether the administration would try to influence the business, especially after a Wall Street Journal article yesterday reported that top Tennessee officials were recently told that GM would consider "community impact" and "carbon footprint" in weighing whether to build compact cars in the state or in Michigan. Ultimately GM chose Orion Township, Mich., located just 35 miles from GM's corporate headquarters.

"If Washington owns it, it just can't keep its hands off," said Sen. Lamar Alexander (R-Tenn.) in an interview yesterday. GM declined to elaborate on its decision, but the state of Michigan and local officials offered hundreds of million of dollars in business tax credits, worker training and other incentives.

Staff writer Kendra Marr contributed to this report.


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