Product Liability Victims Remnants of Bankruptcy
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General Motors Corp.’s sale to a group of U.S. Treasury-funded buyers appears to be a go despite an appeal by victims of defective cars who have pending claims against the company.
Judge Robert E. Gerber of U.S. Bankruptcy Court in Manhattan approved the sale late Sunday, a crucial step toward restructuring. The approval came despite three days of hearing and 850 objections to the restructuring plan, reports the New York Times. Beside injury claims, investors and others have filed objections to the sale.
In the 95-page ruling, the judge said the sale was in the best interest of GM and its creditors and is a better alternative to liquidation. The automakers' Chapter 11 filing was the fourth-largest in U.S. history.
Steven Jakubowski, a lawyer representing the injured, says he will not seek a stay that would block the sale, reports Bloomberg News.
Meanwhile, a group of accident litigants and others filed a notice of appeal early Monday. Their deadline to appeal is Thursday, July 9. General Motors had wanted it make the sale effective immediately.
Judge Gerber decided that GM, like Chrysler, could be done “free and clear of claims” of liability from individuals injured by defective seatbelts, crushed roofs, exploding auto parts, or any number of defects that have been uncovered in the automobiles during litigation.
Barry Bressler, an attorney representing more than 300 individuals with pending tort claims said the ruling was “not unexpected”. He still has a petition pending before the U.S. Supreme Court asking it not to set a precedent for future bankruptcies. The court has not decided to hear the petition and did not halt the Chrysler sale.
General Motors Corp. has agreed to take on future liability claims from defective autos and parts as a means to a quick sale and emergence from Chapter 11 bankruptcy, despite leaving behind claims by victims of past accidents.
Along the way GM also shed 21,000 union employees and closed at least a dozen factoring and almost half of General Motors 6,000 dealerships. The properties will be sold off to the highest bidder.
Other GM brands include Hummer, Saturn and Saab for which GM says it has buyers, reports AP.
General Motors filed for bankruptcy protection June 1. This was viewed as the only option to keep the bankrupt Detroit-based automaker alive.
Future bankruptcies may decide on a quick sale or “363 sales” that cut off existing liability. Setting a dangerous precedent, Jakubowski says that instead, GM should file a traditional Chapter 11 reorganization where creditors vote on the asset sales.
The government has threatened to pull its $33 billion in government financing of the judge hasn’t approved the sale by July 10, reports Bloomberg. #