In the GM bankruptcy, 'speed equals life,' says veteran practitioner John Penn

06/01/2009

Calling the General Motors Corp. bankruptcy filing "the most political and complex bankruptcy in history," attorney John Penn says the auto giant and its lawyers are in for one heck of a ride.

He should know. For 25 years, the bankruptcy partner at Dallas' Haynes and Boone, a former president of the American Bankruptcy Institute, has handled dozens of bankruptcies.

GM filed for Chapter 11 bankruptcy protection on Monday — the fourth largest in U.S. history and largest for an industrial company — as part of the federal government's plan to make the struggling automaker viable.

On Monday, Penn spoke to The National Law Journal about GM's chances for survival, the impact GM's filing might have on bankruptcy law and the politics surrounding this historical and monumental case.

NLJ: ...What would you say are some of GM's biggest problems?

JP: Its biggest problems are the amount that it owes, the foreign competition it has to deal with and it's legacy costs that  still have to be paid....They had no other practical alternative [to bankruptcy] because they had public debt and legacy costs that can only be addressed effectively in bankruptcy.

NLJ: Given GM's size — because it is so big — will this bankruptcy case impact bankruptcy law as we know it?

JP: There will be an impact. But right now we're seeing the splash, and it's hard to predict where the ripples will go....People will look at 363 sales differently. There may be statutory changes to the bankruptcy code regarding asset sales, regarding employment relationships, pension issues and whether this just becomes the "GM exception to all of the other rules."

NLJ: After 25 years of doing this — bankruptcy work — what is it about GM's filing that makes it different from all of the others?

JP:
It is going to be one of the most political and complex bankruptcy cases in history because it is so big, which makes it very complex. And the government is involved in so many different relationships [with the auto industry] that it will make it very political. Remember, the government also owns one of [GM's] primary competitors. There's also the number of people that it will affect directly and indirectly, including GM employees, retirees, suppliers, dealers, all the way down to the Little League teams sponsored in each community.

Article excerpted from The National Law Journal.  For complete text, click here.  (Subscription required.)

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