Tim O'Brien | Jul 1, 2009

GM US, in bankruptcy, is seeking approval from a US bankruptcy court to sell its best bits, its most valuable assets... to itself.

Now while this might seem like yet more corporate jiggery-pokery (and there has been a lot of that around), GM CEO Fritz Henderson told the court that sale of GM's best assets, namely Chevrolet and Cadillac, to a US government-backed 'New GM' entity, is necessary if the giant automaker is to survive.

Henderson said that GM will lose access to US Federal Government funding if the court does not agree to the sale, and will be forced to liquidate.

This proposed sale however, under Section 363 of the US bankruptcy code, would leave the 'bad assets' - and there are a lot of them - adrift with the 'Old GM'.

These assets - and it is unclear precisely what would remain behind in the bankruptcy bin following the proposed sale - would remain under the control of the court and eventually liquidated... in other words, sold to anyone willing to put in a bid.

Also cut adrift by such a move - although they will likely gain concessions - will be the company's creditors, bondholders and some smaller 'splinter unions' and dealerships. They are understandably raising objections to the sale to shore-up their bargaining positions.

The State of Texas is also contesting the sale claiming it is in conflict with state laws on dealerships, while another group prosecuting lawsuits against GM for alleged product defects has also raised its voice in dissent. GM, however, said that a 'New GM' would accept liability for future product defects.

GM also said that objections raised by a group of more than 20 parts suppliers would be addressed under the new entity.

The court hearing is expected to take two days. After the court makes its ruling, things might become a little clearer.

In the meantime, don't think too hard about it unless you want to do your head in.

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