Taskforce official testifies at bankruptcy trial

A member of Obama’s auto taskforce testified in U.S. Bankruptcy Court on Wednesday and had a couple of very interesting things to say. The first was that if the sale of GM’s valuable assets to a new GM is completed, the new company could go public with a stock offer as early as next year:

If General Motors wins court approval for its asset sale this week, a “New GM” could be ready to make an initial public offering in 2010, a U.S. Treasury official testified in U.S. bankruptcy court today.

The official, Harry Wilson, a member of the Obama administration’s auto task force, was in court to argue that the only viable option to save GM is a sale of its main assets to a “New GM” backed by the federal government, as the automaker sought court approval for the deal.

But Wilson also reiterated what CEO Fritz Henderson said on the witness stand yesterday, that if the sale is not approved by June 10, the government would withdraw financing and let GM go to liquidation and close down forever.

But if the sale does not close by the government’s July 10 deadline, Wilson said the government would withdraw its portion of the $33 billion “debtor-in-possession” financing for GM.

“We cannot make an open-ended commitment,” Wilson told U.S. Bankruptcy Court in Manhattan. “At one point, it’s better to cut one’s losses.”

I still think that’s mostly bluster to put pressure on the bankruptcy judge to approve the deal as quickly as possible. I can’t imagine that the Obama administration would really let GM be liquidated if it took a few days past the 10th to get the sale approved. To do so would waste the tens of billions of dollars already loaned to the company, stick the government with the full cost of the pensions for GM’s hundreds of thousands of retirees, and devastate state and local budgets and economies with the cost of having to support another three million unemployed workers.