Chrysler ’s bankruptcy was supposed to serve as a blueprint for General Motors’ Chapter 11 filing and its turning out to be just that. Just as several Chrysler bondholders threw up objections to the automaker’s quick sale to Fiat, several vested parties are protesting GM’s asset sale.
A group that includes 10 state attorney generals, union retirees and other small bondholders has officially entered objections to GM’s asset sale to the ‘new’ GM. The states’ objections involve consumer rights while the union’s concerns lie with retiree healthcare.
Attorneys general from Connecticut, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Vermont and West Virginia entered a motion on Friday to block GM’s sale based on product liability claims. Just as the new Chrysler was able to shed its liabilities linked to defective products made by the old Chrysler, GM is seeking protection from defective vehicles made by the old GM.
The “purchase of substantially all of the operating assets of the debtors should not include an impenetrable shield which insulates (the new GM) from all future product liability claims,” the attorneys general wrote in a court objection obtained by The Detroit News. “To the contrary, public policy dictates that innocent and not yet injured consumers cannot and should not be compelled to bear the cost of future injuries caused by defective GM vehicles.”
Under the terms of the current plan, the new GM would be free and clear of all liabilities – including financial – to those injured by a defective product.
Separately, retired union workers filed an objection that the sale of GM to a new entity would leave more than 50,000 retirees and dependents without healthcare benefits. As unsecured bondholders, there is little hope there would be enough left over to fund the retirees’ healthcare plans, which likely totals about $3 billion.
About 1,500 small bondholders entered similar pleas on Friday, claiming they would be overlooked in the GM asset sale.
However, Chrysler’s bankruptcy court – and even the Supreme Court – overruled all objections filed in the automaker’s Chapter 11 case, giving little hope to those who filed objections against GM’s sale on Friday.
