General Motors Corporation (“GM”) and 3 affiliated entities (collectively with GM, “Debtors”) have filed bankruptcy. Chevrolet-Saturn of Harlem, Inc. and Saturn, LLC are direct subsidiaries of General Motors Corporation. Saturn Distribution Corporation is referred to by General Motors Corporation as an “indirect subsidiary.” However,GM has hundreds of subsidiaries and having only 3 subsidiaries file petitions is remarkable. Compare, for example, Chrysler’s bankruptcy where 24 subsidiaries filed. However, for GM and its suppliers, having only 4 debtors greatly simplifies many aspects of the bankruptcy process.In any major bankruptcy filing, deciding which subsidiaries file and which do not can be an extremely complicated decision. In the case of GM, it must have been exhaustively considered. Although the approach greatly simplifies many aspects of the bankruptcy, whether the bankruptcy of only these 4 companies will be sufficient is a question that might not be answered for months or years.
In the planned 363 sale to New GM, the assets being sold will include substantially all of old GM’s equity interests in its directly held subsidiaries and joint ventures. Those subsidiaries and joint ventures will not have their assets sanitized by the bankruptcy process of the parent. Simply, the question is whether the assets of those subsidiaries and joint ventures are encumbered by unknown, unforeseen or underestimated legacy liabilities.
In term of a supplier’s concerns, when analyzing contracts and cure amounts, the supplier is going to have a much easier time. The supplier only is going to have to consider contracts with these four debtors. Contracts with “non-debtors” should not be affected by this bankruptcy.
The following are the names, case numbers and copies of the bankruptcy petitions (click case number to see petition).
|Debtor Name||Case Number|
|General Motors Corporation||09-50026|
|Saturn Distribution Corporation||09-50028|
|Chevrolet-Saturn of Harlem, Inc.||09-13558|
For more post on the GM Bankruptcy, click the Filed under General Motors Bankruptcy link below.