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General Motors' Bankruptcy Filing to Generate Significant Economic Activity and Employ Thousands of Lawyers

Strategic Insights

— 2 min read

General Motors' expected bankruptcy filing, which will likely occur by June 1 as part of a restructuring orchestrated by the federal government, is expected to generate significant economic activity in Detroit. The case, one of the most complex in U.S. history, will involve thousands of lawyers, including those from top firms such as Weil, Gotshal & Manges and Dewey & LeBoeuf, who will work on the filing and subsequent reorganization of the company. The bankruptcy case is expected to create a new version of the company, with desirable brands such as Chevrolet and Cadillac being sold to a new entity, while less-attractive assets and liabilities will remain with the old G.M.

Key Takeaways:

  • The G.M. bankruptcy filing is expected to be the most complex and largest in U.S. history, with a projected $40 billion to $70 billion in debtor-in-possession financing required to create a new version of the company and dispose of its assets.
  • The case will involve hundreds of lawyers from top firms, including Weil, Gotshal & Manges, Dewey & LeBoeuf, Cravath, Swaine & Moore, and Cleary, Gottlieb, Steen & Hamilton, who will work on the filing and subsequent reorganization of the company.
  • The restructuring plan, led by Harvey R. Miller of Weil Gotshal and Martin Bienenstock of Dewey & LeBoeuf, will split G.M.'s good assets from its bad assets, with the goal of creating a viable company that is not burdened with the other businesses.
  • The government's auto task force has retained the services of several restructuring veterans, including Matthew Feldman, formerly a partner at the law firm Willkie, Farr & Gallagher, and Harry Wilson, formerly an executive at the distressed-debt-focused hedge fund Silver Point Capital.
  • The U.A.W. has been receiving counsel from longtime advisers at Lazard, the investment bank, and the law firm Cleary, Gottlieb, Steen & Hamilton, and has reached a deal with G.M. that includes concessions by workers and modifications to a health care fund.
  • Communities where G.M. does business are eligible to share in $50 million in federal assistance, and suppliers have been offered assistance, while GMAC, the company's lending arm, has received additional funding from the Treasury.

Statistics:

  • The G.M. bankruptcy filing is expected to create a new version of the company, with desirable brands such as Chevrolet and Cadillac being sold to a new entity, while less-attractive assets and liabilities will remain with the old G.M.
  • The case will involve hundreds of lawyers from top firms, with estimated legal fees totaling hundreds of millions of dollars.
  • The restructuring plan is expected to require $40 billion to $70 billion in debtor-in-possession financing.
  • The U.A.W. has agreed to concessions by workers and modifications to a health care fund as part of a deal with G.M.
  • Communities where G.M. does business are eligible to share in $50 million in federal assistance.

Sources:

  • Micheline Maynard and Michael J. de la Merced, "G.M. on Brink of Biggest Bankruptcy Filing," The New York Times, April 26, 2009.
  • Rick Wagoner, "G.M. to File for Chapter 11 Bankruptcy Protection," The New York Times, March 30, 2009.
  • Stephen P. Yokich, quoted in "G.M. May File for Chapter 11 to Survive," The New York Times, February 23, 1995.
  • Weil, Gotshal & Manges, "Lehman Brothers Holdings Inc. v. Lehman Brothers Holdings Inc.," U.S. Bankruptcy Court, Southern District of New York, 2009.

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