The Bankruptcy Court gave its approval for GM to borrow up to $33.3 billion from the U.S., Canadian and Ontario governments to assist the company through its bankruptcy. GM had previously received interim court approval on June 2nd to access up to$15 billion in bankruptcy financing, known as a debtor-in-possession loan. Aided by the loans, the new GM is expected to emerge from bankruptcy in the near future. In exchange for the financing, the U.S. government will take a 60 percent ownership stake in the new company and the Canadian government will take a 12.5 percent interest. The UAW will eventually control 17.5 percent of the new GM to fund its retiree health care obligation, and the remaining 10 percent will be owned by GM’s unsecured bondholders.
The Court also rejected a bid by 122,000 non-union retirees to form an official committee to negotiate with GM over proposed cuts in retirements packages. Although pensions will be transferred to the new GM, retirees face sharp cuts in medical benefits in company’s effort to cut costs. The judge based his denial on the argument that since GM had the right to modify or terminate the retirees’ benefits before the bankruptcy petition was filed, that the retirees could not challenge the company’s ability to make changes as part of its bankruptcy restructuring. GM has stated that it plans to continue to pay health care and life insurance benefits for its salaried retirees and their surviving spouses, but the benefits are expected to be reduced and will include increased co-pays.
- Richard V. Stokan, Jr.