Crucial GM asset sale approved by judge

GM is downsizing severely. And it has no real choice except to do so.

GM has been given the legal go-ahead to shed its most troubled assets in an attempt to create a new company that can emerge quickly from bankruptcy. GM was forced into bankruptcy on June 1st.

A Manhattan bankruptcy judge has now approved the company's bid to liquidate its loss-making divisions. GM is still losing billions of dollars and would have been forced to liquidate the entire company without the court ruling.

US bankruptcy court judge Robert Gerber wrote in his 95-page opinion that "the only alternative to an immediate sale [of troubled assets] is liquidation - 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." Gerber said the ruling would "prevent the death of the patient on the operating table."

GM will now build a much smaller company around its core Chevrolet, GMC, Buick and Cadillac brands and sell-off all unprofitable and unneeded assets. With its ability to do so, that new company will be able to emerge from bankruptcy protection more quickly.

The new GM will received a total of 60 billion from the US Treasury, with the United States government then owning a 60 percent stake in the new company. The UAW will take a 17.5 percent stake too and a 12 percent share will go to the Canadian government which has also provided funds to GM's operations in Canada. A 10 percent stake will go to GM bondholders as part of a deal that re-negotiated the company's unsecured debt obligations.

The new company may even return to selling shares on the stock market as early as 2010, with an initial public offering possibly coming sometime next year.