tag:blogger.com,1999:blog-2158313809496182075.post6189110210937613046..comments2024-03-19T16:56:30.229-05:00Comments on Distressed and Turnaround Blog: Comedy in Tragedy: The Daily Show on GM LiabilitiesSabeen Firozalihttp://www.blogger.com/profile/06214452702561969142noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2158313809496182075.post-89855015861384047952014-11-26T10:39:33.021-06:002014-11-26T10:39:33.021-06:00Thomas, thank you so much for sharing your knowled...Thomas, thank you so much for sharing your knowledge! I had no idea that GM expressly assumed all liabilities which arise out of accidents. That's interesting that you think they assumed the liabilities to maintain a strong brand. I wonder if that's a common practice. <br /><br />Your possible solution for handling pre-petition liabilities, that of expressly assuming them, is a fantastic one. I agree that it is a market driven solution and really works in favor of new shareholders too since they would want to make sure that the brand remains strong.Sabeen Firozalihttps://www.blogger.com/profile/06214452702561969142noreply@blogger.comtag:blogger.com,1999:blog-2158313809496182075.post-70682446076341743662014-11-20T11:35:41.182-06:002014-11-20T11:35:41.182-06:00I came across your page here earlier this year whe...I came across your page here earlier this year when this issue was getting a lot of attention. At the time I was in a bankruptcy and restructuring course with a professor who had played a central role in the original GM bankruptcy proceedings. Something that came up in our class discussion of this issue, which was almost entirely ignored in the early media coverage (the Stewart piece is a perfect example), is the fact that New GM expressly assumed "all liabilities to third parties for death, personal injury, or other injury to persons … which arise directly out of accidents" in the Master Sale and Purchase Agreement. So I don't think the bankruptcy issue raised was ever whether personal injury/wrongful death plaintiffs would have claims against New GM--New GM had assumed those liabilities in the 363 sale. Rather, the question was whether economic-loss plaintiffs (e.g. someone whose Old GM car was worth $10k before the defect was discovered but is now worth $9k, and wants to sue New GM for the loss in value) would have claims against New GM.<br /><br />Knowing this, another question comes to mind, namely, why would New GM voluntarily assume liability for these personal injury claims? I think the answer is that they needed to assume these liabilities to maintain a strong brand moving forward. If the news was filled with stories about GM car owners being injured by their defective cars and going uncompensated, it would become a serious drag on sales (because few customers would make any distinction between the "New GM" cars currently for sale and the "Old GM" cars that were ruining people's lives).<br /><br />Perhaps this is another potential solution to the problem you identify of corporations improperly avoiding liability for pre-petition activities through bankruptcy--if the main point of reorganization is to maintain going-concern value, and if that value is hurt by not assuming certain important liabilities in bankruptcy, then this will serve as a check on the problem. It is a market-driven solution, and, at least in the case of large, visible corporations, it seems like it works.Anonymoushttps://www.blogger.com/profile/03441011243572582946noreply@blogger.comtag:blogger.com,1999:blog-2158313809496182075.post-10785575229008027742014-04-10T10:05:35.749-05:002014-04-10T10:05:35.749-05:00GM's secured creditors weren't impaired. S...GM's secured creditors weren't impaired. Secured creditors made up a relatively small number of total creditors, and secured bond holders were mostly the US and Canadian governments. <br /><br />Chrysler secured creditors were impaired in favor of the UAW receiving 40 cents on the dollar, which resulted in major consternation in the bond market. <br />http://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-lawSabeen Firozalihttps://www.blogger.com/profile/06214452702561969142noreply@blogger.comtag:blogger.com,1999:blog-2158313809496182075.post-55125490826560753962014-04-08T15:06:25.618-05:002014-04-08T15:06:25.618-05:00Weren't GM secured creditors impaired as well ...Weren't GM secured creditors impaired as well in a negotiated deal? Regardless going to take a hit then...Anonymoushttps://www.blogger.com/profile/13084475367967675680noreply@blogger.com