Groups representing plaintiffs in car accidents said Monday they would oppose General Motors' attempt to quickly exit bankruptcy protection, arguing that hundreds of victims could be hurt by the government-led plan.  U.S. Judge Robert Gerber (U.S. Bankruptcy Court for the Southern District of New York) approved an important part of the plan late Sunday, allowing the troubled automaker to sell its assets to a new company.  The Court found that the deal was in the best interest of both the automaker and its creditors, who would get nothing if the automaker was forced to liquidate.  Although GM and the Obama administration praised the Judge's decision, opponents readied an appeal to the U.S. District Court in New York.  A Chicago law firm representing people who have sued GM in several auto accident cases said they objected to parts of the plan that would free the "new GM" from liability for people injured by a defective GM product before June 1.  The appeal would assert that Judge Gerber overstepped his authority by preventing victims from pursuing litigation under their state product liability laws.  It is etimated that about 1,000 lawsuits could be pending with potential damages in the range of hundreds of millions of dollars.

     Steve Rattner, the head of the Obama administration's auto task force, said the government was "confident that (Gerber's) decision will stand and the sale of GM's assets to new GM will proceed expeditiously."  The bankruptcy judge's ruling followed a three-day hearing that wrapped up Thursday. GM and government officials had urged a quick approval of the sale, saying it was needed to keep the automaker from selling itself off piece by piece. The Treasury Department, which is expected to provide about $50 billion in aid to the automaker, has vowed to cut off funding to GM if the sale doesn't go through by July 10.  "Now it's our responsibility to fix this business and place the company on a clear path to success without delay," GM CEO Fritz Henderson said in a statement Monday.

     Litigants injured by a defective GM product before June 1 would have to seek compensation from the "old GM," the collection of assets leftover from the sale, where they would be less likely to receive compensation.  (The new GM has agreed to take on responsibility for future product liability claims involving vehicles made by the old company.).  The old GM will remain an entity until all its facilities are sold off, a process that could take months or years to complete. The government has said it plans to provide about $1.18 billion to fund the wind-down process.  The "old GM," which will be known as Motors Liquidation Co., will include a smattering of properties, several of which are facilities already slated to be closed. They will be sold to the highest bidder under court supervision.  While some of the old GM's assests have value - for example, old GM brands like Hummer, Saturn and Saab have buyers in line - other asserts, such as old GM's common stock, will likely soon be worthless. 

    While some anticipate a lengthy appeal that would ultimately be reviewed by the U.S. Supreme Court, others expect that the appellate courts will be reluctant to do anything that would delay GM's emergence from bankruptcy.  For a more detailed discussion of Chapter 11 proceedings in general, see my blog entries at the National Bankruptcy Forum.

-Drew Broaddus