Abbott, other AGs hail GM bankruptcy agreement

Chris Rizo Jul. 7, 2009, 6:40am

Greg Abbott (R-Texas)

NEW YORK (Legal Newsline)-A bankruptcy court's decision in the General Motors Corp. case this week that disputes between the automaker and its dealers will be up to state authorities to settle has drawn praise from state attorneys general.

The decision was hailed by, among other attorneys general, Greg Abbott of Texas and John Suthers of Colorado.

The court's decision in the automaker's Chapter 11 case follows objections by dozens of attorneys general filed in the U.S. Bankruptcy Court for the Southern District of New York.

The AGs were led by Nebraska Attorney General Jon Bruning, president of the National Association of Attorneys General, who told Legal Newsline he was out to protect the millions of American who have a GM model in their garage.

The AGs filed objections to the troubled automaker's then-pending reorganization plan amid concerns it trample state laws aimed at protecting consumers and dealers.

The attorneys general said GM's original bankruptcy plan would have also forced current dealers to sign new agreements that would leave them with no state protections.

"The Texas Legislature has enacted numerous laws that govern the relationships between franchise dealers and automobile manufacturers," Abbott said in a statement. "In an attempt to avoid those laws, General Motors -- which is 60 percent owned by the federal government -- tried to force Texas dealers to sign agreements that specifically waived their rights under state law."

General Motors had also sought to force disputes with dealers to be settled in New York courts, despite laws in other states that give them jurisdiction in such matters.

"What we achieved in this bankruptcy case is very significant for Colorado and the dealerships affected by GM's bankruptcy," Suthers said. "This concession will allow the state of Colorado to maintain its regulatory authority over the agreements New GM has with its dealerships. This concession also will help maintain a level playing field between New GM and other auto manufacturers."

The plan would have also disproportionately affected rural markets because some motorists would be forced to drive hundreds of miles to have their GM model serviced by a dealership, Bruning said.

"I'm confident the concessions given to the states, while of great benefit, won't interfere with the ability of new GM to function as a viable company nor should they add to the burden placed on taxpayers by the (U.S.) Treasury's purchase of GM," Bruning said Thursday.

In his 87-page ruling issued late Sunday, U.S. Bankruptcy Court Judge Robert Gerber approved the company's plan to exit bankruptcy. He said without the plan approved by the court, liquidation would be the only option for the broke carmaker.

He said that would be a "disastrous result for GM's creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates. In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing."

Under the deal approved, the U.S. government will take about a 61 percent stake in the new General Motors, after loaning GM more than $50 billion.

Meanwhile, the Canadian government, which also loaned GM money, will hold about a 12 percent stake. A retiree healthcare trust for the United Auto Workers union will get a 17.5 percent stake. Bondholders and other unsecured creditors will get a 10 percent stake.

From Legal Newsline: Reach staff reporter Chris Rizo at

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