The 2009 General Motors Chapter 11 sale of the assets of automobile manufacturer General Motors and some of its subsidiaries was implemented through Chapter 11, Title 11, United States Code in the United States bankruptcy court for the Southern District of New York. The United States government-endorsed sale enabled the NGMCO Inc.GM 363 Asset Sale Approved by U.S. Bankruptcy Court July 6, 2009. Accessed September 8, 2012. ("New GM") to purchase the continuing operational assets of the old GM. Normal operations, including employee compensation, warranties, and other customer services were uninterrupted during the bankruptcy proceedings. Operations outside of the United States were not included in the court filing.

The company received $33 billion in debtor-in-possession financing to complete the process.G.M. Wins Final Approval of DIP Financing GM filed for Chapter 11 reorganization in the Manhattan New York federal bankruptcy court on June 1, 2009, at approximately 8:00 am EDT. June 1, 2009, was the deadline to supply an acceptable viability plan to the U.S. Treasury. The filing reported US$82.29 billion in assets and US$172.81 billion in debt.

After the Chapter 11 filing, effective Monday, June 8, 2009, GM was removed from the Dow Jones Industrial Average and replaced by Cisco Systems. From Tuesday June 2, old GM stock has traded Over the Counter (Pink Sheets/OTCBB), initially under the symbol GMGMQ and subsequently under the symbol MTLQQ.

On July 10, 2009, a new entity completed the purchase of continuing operations, assets and trademarks of GM as a part of the 'pre-packaged' Chapter 11 reorganization.Stoll, John D., and Neil King Jr. (July 10, 2009).GM Emerges From Bankruptcy.The Wall Street Journal. Retrieved on July 10, 2009. As ranked by total assets, GM's bankruptcy marks one of the largest corporate Chapter 11 bankruptcies in U.S. history. The Chapter 11 filing was the fourth-largest in U.S. history, following Lehman Brothers, Washington Mutual and WorldCom. A new entity with the backing of the United States Treasury was formed to acquire profitable assets, under section 363 of the Bankruptcy Code, with the new company planning to issue an initial public offering (IPO) of stock in 2010.Stoll, John D., and David McLaughlin (July 2, 2009).General Motors Aims for IPO Next Year.The Wall Street Journal. Retrieved on July 10, 2009. The remaining pre-petition creditors claims are paid from the former corporation's assets.

Background

+ The following table is a comparison (estimates) of the new GM and the old GM Old GM (before July 10, 2009) New GM (as of July 10, 2009) Buick Cadillac Chevrolet GM Daewoo (48.2%) GMC Holden Opel Vauxhall Motors Hummer Pontiac Saturn Saab Brands Buick Cadillac Chevrolet GM Daewoo (70.1%) GMC Holden Opel Vauxhall Motors 5,900 U.S. Dealerships 5,000 Common shareholders, bondholders and secured creditors Ownership The United States Treasury, the Canada Development Investment Corporation, Government of Ontario, Old GM bondholders, and UAW and CAW unions 47 U.S. Plants 34 $94.7 billion USD Debt $17 billion USD 91,000 U.S. employees 68,500

General Motors was financially vulnerable before the automotive industry crisis of 2008–2010. In 2005, the company posted a loss of US$10.6 billion (~$ in ). In 2006, its attempts to obtain U.S. government financing to support its pension liabilities and also to form commercial alliances with Nissan and Renault failed. For fiscal year 2007, GM's losses for the year were US$38.7 billion, (~$ in ) and sales for the following year dropped by 45%.

On November 7, 2008, General Motors reported it had projected it would run out of cash around mid-2009 without a combination of government funding, a merger, or sales of assets. Ten days later General Motors representatives, along with executives from Ford and Chrysler testified about their need for financial aid at a congressional hearing in Washington D.C. All three companies were unsuccessful in their attempts to obtain legislation to authorize U.S. government aid, and were invited to draft a new action plan for the sustainability of the industry.Detroit Chiefs Plead for Aid. New York Times on November 18, 2008.. Retrieved November 21, 2008. On December 2, 2008, General Motors submitted its "Restructuring Plan for Long-Term Viability" to the Senate Banking Committee and House of Representatives Financial Services Committee.General Motors Restructuring Plan for Long-Term Viability Congress declined to act, but in December 2008 the Bush administration provided a "bridge loan" to General Motors with the requirement of a revised business plan. It said it needed $4.6 billion in loans within weeks, from the $18 billion it had already requested, and an additional $12 billion in financial support in order to stave off bankruptcy. On February 26, 2009, General Motors announced that its cash reserves were down to $14 billion at the end of 2008. G.M. lost $30.9 billion, or $53.32 a share, in 2008 and spent $19.2 billion of its cash reserves. Mr. Wagoner met with President Obama’s auto task force, and the company said that it could not survive much longer without additional government loans.

On the March 30, 2009 deadline, President Barack Obama declined to provide financial aid to General Motors, and requested that General Motors produce credible plans, saying that the company's proposals had avoided tough decisions, and that Chapter 11 bankruptcy appeared the most promising way to reduce its debts, by allowing the courts to compel bondholders and trade unions into settlements. GM Chairman and CEO Rick Wagoner was also forced to resign. GM bondholders rejected the government's first offer, but the unions agreed to the preferential terms. A bondholder debt to equity counteroffer was ignored.

Earlier restructuring efforts Efforts to sell General Motors' European operations ran into difficulties, as the corporation was expected to file for bankruptcy protection by June 1, 2009. United States government officials suggested that, if they were satisfied with the company's plans to restructure, the U.S. government would take at least a 50% equity stake and reserve the right to name board members. On May 31, 2009, news broke that the U.S. would initially likely become the largest shareholder of the reorganized GM following a bankruptcy filing and re-emergence from bankruptcy. The U.S. government would invest up to $50 billion and own 60% of the new GM and the Canadian government would own 12.5%.CNN, 31 May 2009, General Motors on the brink

Some observers also claimed that creditors were encouraged to push GM into bankruptcy protection because it would trigger a credit event, and thus a beneficial financial payout, on credit default swaps held by these creditors. Due to a lack of transparency, there was no way to find out who the CDS protection buyers and protection writers were, and they were subsequently left out of the negotiation process.

U.S. government-backed guarantee of warranties On March 29, 2009, the U.S Treasury committed to fund a government guarantee of General Motors' warranty liabilities, up to US$360.6 million (~$ in ).

On May 27, 2009, the U.S. Treasury advanced a secured loan of US$360.6 million to GM, and GM issued a note to the Treasury for US$360.6 million, plus $24.1 million USD as additional compensation for the warranty advance, pursuant to the terms of the Warranty Agreement dated December 31, 2008, between GM and the U.S. Treasury. The loan funded a separate account established by GM Warranty LLC, a new special purpose subsidiary of GM that was formed to operate the warranty program. GM also on May 29, 2009, contributed $49.2 million to GM Warranty LLC to fund the program.

Proposed sale of Opel and Vauxhall On May 30, 2009, it was announced that a deal had been reached to transfer New Opel (Opel plus Vauxhall, minus Saab) assets to a separate company majority-owned by a consortium led by Sberbank of Russia (35%), Magna International of Canada (20%), and Opel employees and car dealers (10%). GM was expected to keep a 35% minority stake in the new company. It was announced on November 3, 2009, that the GM board had decided not to sell off Opel. However, after the reorganization in 2017, Opel and Vauxhall would later be sold to Groupe PSA for $2.3 billion (~$ in ).

Chapter 11 protection

Filing

On the morning of June 1, 2009, Chevrolet-Saturn of Harlem, a dealership in Manhattan that is owned by GM itself, filed for bankruptcy protection there, followed in the same court by General Motors Corporation (the main GM in Detroit), GM's subsidiary Saturn LLC, and Saturn LLC's subsidiary Saturn Distribution Corporation. All cases were assigned to Judge Robert Gerber.

The filing by the dealership declared General Motors to be a debtor in possession. The Manhattan dealership's filing allowed General Motors to file its own bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York, its preferred court. Normally, a company would file for bankruptcy in the courts located either in the state where the company is incorporated (which for GM was Delaware), or where it conducts operations (which would have been Michigan, where the company was headquartered). General Motors' attorneys, however, preferred to file in the federal courts in New York, because those courts have a reputation for expertise in bankruptcy. In a press conference later that day, the GM Chief Executive Officer, Fritz Henderson, stressed that he intended for the bankruptcy process to move quickly. In addition to Mr Henderson's press conference, President of the United States Barack Obama made a speech from the White House after the court filing.

Court schedule and motions The General Motors Chapter 11 filing formally was entitled "In re General Motors Corp.", and was case number 09-50026 in the Southern District, Manhattan, New York. General Motors was represented by the New York specialist law firm Weil, Gotshal & Manges. The United States Treasury was represented by the United States Attorneys Office for the Southern District of New York and Cadwalader, Wickersham & Taft LLP. An ad hoc group of the bondholders of General Motors Corporation was also represented in court.

One of the first motions filed in court was one to void the leases on the seven corporate jets, and corporate aircraft hangar at Detroit Metropolitan Wayne County Airport, for being no longer valuable to the company's business — a lease that the company had, according to its spokesman, found itself unable to escape in 2008 when it had tried to.

On June 1, 2009, the court gave interim approval to GM's request to borrow US$15 billion as debtor-in-possession funding, the company only having US$2 billion cash in hand. The United States Treasury argued in court that it was the only source of such debtor in possession funding, and that without the money from the loan General Motors would have no option but liquidation. Other motions in the first-day hearing included motions to approve payments to key suppliers and to employees and distributors who are in possession of goods manufactured for General Motors. All motions passed in court without substantial objection.

The case schedule laid out by the court is as follows: 2009-06-19: Deadline for filing all objections to the sale of General Motors. 2009-06-22: Deadline for making competing bids in the auction of General Motors' assets. 2009-06-25: Final hearing on the bankruptcy loan. 2009-07-10: Deadline for completion of the sale, requested by the U.S. Treasury and General Motors.

Planned sale