Any hope of a high-speed bankruptcy by General Motors faces a serious obstacle: a judge not the Obama administration,not GM management and not the companys creditors would reign in court. A bankruptcy judge would be required by law to listen to unions,whose members fear for their jobs,benefits and pensions. And the judge would have to pay attention to creditors,including bondholders frustrated by how much they stand to lose if GM is broken up into good and bad companies as the administration is planning. Even a judge sympathetic to the administration and the administration would look for a sympathetic court might be reluctant to rubber-stamp that plan. Once youre in,nobody knows where its going because anyone can come into court and say no,no,no, said Sandra E. Mayerson,head of the insolvency practice in the New York law office of Squire,Sanders & Dempsey. Ive had preplanned bankruptcies that we thought would be out in 90 days but we were in for a year. While a bankruptcy judge agreed to a lightning-quick sale of Lehman Brothers assets last fall,he did so only after a parade of government regulators insisted that a failure to sell could undermine the world financial system. That claim would be a stretch for GM,whose assets are factories,cars and other tangible goods that,unlike Lehmans financial contracts,have value that is unlikely to evaporate quickly. Its a very different kind of business than Lehman, said Howard Seife,head of the bankruptcy and financial restructuring practice at Chadbourne & Parke in New York. Casting aside the deliberative processes of bankruptcy would undoubtedly lead other companies to argue for the same treatment in the future. The judge would want to weigh carefully the stakes,given GMs size and its close ties to companies around the world. Unionized employees and retirees would ask that their contracts be protected,and the Bankruptcy Code has provisions specifically requiring good-faith negotiations before labor agreements can be modified. Such talks could easily take many months. Bankruptcy cases often drag on far longer than anticipated,slowed by unexpected obstacles to reorganization. The auto parts company Delphi,once a unit of GM and now a supplier,has languished in bankruptcy proceedings for four years,twice as long as originally planned,for example. Separating and selling off GMs more valuable assets,a strategy pursued at troubled banks (usually outside of bankruptcy,it should be noted),would most likely pit the companys financial advisers against those working for creditors. Creditors may think Buick is their premier line,management may think Pontiac is their premier line, Mayerson observed. That argument will delay important decisions about the companys future,she added. It really isnt an asset problem at GM so much as a management problem.
