Bankruptcy sale to include the worst of GM’s holdings
As General Motors Corp. prepares to sell its best assets to a streamlined new entity, the worst of what it owns will be auctioned off in bankruptcy court, including contaminated factory sites, parking lots in Flint, Mich., and a nine-hole golf course in New Jersey.
One property the carmaker is ditching is a foundry in Massena, bordered on the east by the St. Regis Mohawk Indian Reservation and on the north by the St. Lawrence River. Built to make aluminum cylinder heads for the Chevrolet Corvair in the 1950s, it generated PCB sludge and waste from hydraulic fluids.
“It was created by GM dumping hazardous waste on the banks of the river, such that the waste oozed into the water and the land,” said John Privitera, a lawyer for the tribe at McNamee Lochner Titus & Williams in Albany. “It was picked up by animals and moved up the food chain through fish and into Mohawk women . . . into their breast milk, into their babies.”
The largest U. S. automaker, following its smaller rival Chrysler LLC, is using the bankruptcy process to spin off a new entity with reduced costs and debt while leaving the old GM with unwanted property and obligations to creditors, dealers, retirees, accident victims and environmental agencies.
The discarded assets will be all that creditors have to satisfy their claims as GM starts to unwind liabilities of $172.8 billion — more than twice its reported assets.
The pollutants at the Massena site wound up in the St. Lawrence River, migrated to the reservation and put the property in the New York State Registry of Hazardous Waste Sites and on the federal superfund list of contaminated places.
While the Massena site is eligible for federal cleanup money, according to Privitera, some of the cost may come out of creditors’ hide, a GM restructuring official testified.
It would cost GM as much as $225 million to clean up the site and restock the river with edible fish if it held on to the property, Privitera estimated.
At the first day of hearings on GM’s proposed asset sale restructuring chief Albert Koch estimated Tuesday that the company’s environmental liabilities for all sites are $530 million. Chief Executive Officer Fritz Henderson said $1.25 billion was needed to wind down the old GM, up from an earlier estimate of $950 million, because of a reassessment of the environmental liabilities.
If there isn’t enough money to wrap up the GM bankruptcy, creditors might get less than the 10 percent stake and warrants in the new GM that were earmarked for them, Koch said. A lawyer for GM’s unsecured creditors, Thomas Mayer, said the Treasury will provide $1.17 billion, enough to stop the creditors from objecting to the sale.
The golf course on GM’s hit list, the Hyatt Hills Golf Complex in Clark, N. J., was built on the reclaimed site of a factory that began by making hard rubber steering wheels and door handles for the automaker in 1938.
“The new GM hardly needs to be in the golf course business,” said Tom Wilkinson, GM’s director of news relations, in an e-mail. “The old GM will be selling a lot of potentially valuable but peripheral property the company accumulated over 100 years, kind of like a big garage sale. You will see some really good real estate deals come out of this for investors and communities.”
New York Attorney General Andrew Cuomo recommended that the bankruptcy judge in charge of the GM case scrutinize the carmaker’s proposed asset sale to make sure environmental obligations aren’t avoided.
New York, in a court filing, listed 11 GM sites that have contamination or “ongoing environmental compliance obligations’ such as cleaning up soil, sediment, surface and groundwater and long-term monitoring, including property in Syracuse, Rochester and Buffalo.
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