Tag: bankruptcy

Color Me Surprised

GM is going back into bankruptcy court:

A U.S. bankruptcy judge on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch, though neither side seemed ready to negotiate quite yet.

Judge Robert Gerber, of the U.S. Bankruptcy Court in Manhattan, said he would welcome the prospect of a resolution that avoided a “monstrous battle.”

Gerber is the same judge who in 2009 oversaw GM’s whirlwind Chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Gerber to enforce the so-called bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall.

Under the plan approved by Gerber, GM channeled its burdensome liabilities into a shell known as “Old GM,” while selling its profitable assets to “New GM,” a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.

Accident victims are not involved in the dispute before Gerber, which concerns only claims for loss of car value.

The law here is quite complicated. As far as I understand, piercing the bankruptcy shield is difficult. However, if the GM (and the government) committed fraud by concealing the ignition switch problem before bankruptcy, this could make new GM liable. And if the judge finds that, this could end up before the Supreme Court.

I suspect this is the first of many deceptions and financial shenanigans that were swept under the rug in GM’s controlled bankruptcy. Do not be surprised if they end up in court again. And do not be surprised if we find out that some shady and illegal stuff goes on with industry and government ride in the same cart.

Saving Detroit

What the hell?

Ruling the governor and Detroit’s emergency manager violated the state constitution, an Ingham County Circuit judge ordered Friday that Detroit’s federal bankruptcy filing be withdrawn.

“It’s absolutely needed,” said Judge Rosemary Aquilina, observing she hopes Gov. Rick Snyder “reads certain sections of the (Michigan) constitution and reconsiders his actions.”

The judge said state law guards against retirement benefits being “diminished,” but there will be no such protection in federal bankruptcy court.

I’m going to wait until we get some posting about where judge Aquilina is on the law. It seems to me that she’s saying since retirement benefits are guaranteed under state law, the city can not file for bankruptcy and potentially reduce those benefits. She might be right on the law, I don’t know. But as Veronique de Rugy points out, Detroit may have no choice. They have over $9 billion in unfunded pension requirements and over 60% of the workers in the system are retirees, not active workers.

There’s also this:

The filing involved a bit of courtroom drama.

With rumors it was imminent Thursday afternoon, attorneys representing the pension boards hurried into Aquilina’s court in Lansing to ask for a temporary restraining order.

But Snyder and Orr beat them by a few minutes. Aquilina, informed by phone, allowed the pension board lawyers to revise their restraining order request, then granted it.

Prior to her ruling on Friday, the judge criticized the Snyder administration and Schuette’s office over their hasty move.

“It’s cheating, sir, and it’s cheating good people who work,” the judge told assistant state Attorney General Brian Devlin. “It’s also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.”

Actually, your honor, he took them into bankruptcy so that they could their debts under control. The Detroit Free Press claims she’s sending copies of her order to Obama (Update: Adam Steinbaugh claims this is the note). What the fuck Barack Obama has to do with Detroit’s bankruptcy, I have no idea.

I will again wait until I see what someone with a legal background posts about the ruling. My initial impression is that a judge is acting outside the law and needlessly politicizing this (politicizing it on the blogs or in debate is fine; in a courtroom, not so much).

Hostess in Mediation as Website Gets Hacked

The drama continues.

A New York Judge has ordered Hostess and the kamikaze baker’s union to at least try working this out, but I think it’s too late.

Some of our own local businesses that use Wonder Bread (Arthur Bryant BBQ being one) are already being forced to switch to alternate vendors.  Grocery stores also aren’t going to let that prime shelf space sit empty while this drags on, are they?

For his part, Rayburn seems delighted to stick his tongue in the creme-filling and go “nuh nyuh nuh”:

While Hostess has seen interest in pieces of the business, its labor contracts and pension obligations have deterred offers for the whole company, Chief Executive Officer Gregory F. Rayburn said last week.

“We will try to get what we can from the assets,” Rayburn told Bloomberg Television. “It’s an over-capacity industry, though, so that’s going to be a difficult prospect.”

Translation:  “No responsible buyers want to put up with you idiots or try to sell the products that you make at needlessly high prices caused by your fat compensation and stupid rules.”

Speaking of insults, the Resources page on the Twinkies.org website (Note: not an official Hostess website) got hacked at some point today.  “Were you smart enough to get a screenshot, Thrill?”  Why, yes, I was!