In Re General Motors Corp.

DECISION ON DEBTORS’ MOTION FOR APPROVAL OF (1) SALE OF ASSETS TO VEHICLE ACQUISITION HOLDINGS LLC; (2) ASSUMPTION AND ASSIGNMENT OF RELATED EXECUTORY CONTRACTS; AND (3) ENTRY INTO UAW RETIREE SETTLEMENT AGREEMENT

TABLE OF CONTENTS

Findings of Fact.475

1. Background.475

2. GM’s Dealer Network.475

3. GM’s Suppliers .476

4. GM’s Financial Distress.476

5. U.S. Government Assistance.476

6. GM’s First Quarter Results .479

7. The 363 Transaction.479

8. The Liquidation Alternative.'-481

9. Fairness of the Transaction.481

10. Specifics of the Transaction.481

(a) Acquired and Excluded Assets.481

*473 (b) Assumed and Excluded Liabilities.481

(c) Consideration.482

(d) Ownership of New GM.482

(e) Other Aspects of Transaction .483

(f) The Proposed Sale Order.483

Contingent Liabilities.483 H tH

Agreement with UAW.484 (M T-1

Need for Speed.484 CO T“1

Ultimate Facts.485 ^ t-H

Discussion.486

1. Sale Under Section 363 .486

(a) Utilization of Section 363 .486

(b) Compliance with Standards for Approval of Section 363 Sales .493

(c) “Sub Rosa” Plan.495

(d) Recharacterization or Subordination of U.S. Treasury Debt.498

(e) Asserted Inability to Credit Bid.499

2. Successor Liability Issues.499

(a) Textual Analysis.501

(b) Caselaw.503

3. Asbestos Issues.506

4. Environmental Issues.507

5. Splinter Union Retiree Issues .509

6. Dealer Issues.512

7. ECC Trust.516

8. “Equally and Ratably” Issues.517

9. Unauthorized Use of TARP Funds Issues.518

10. Cure Objections.519

11. UAW Settlement Objections.519

12. Stockholder Objections .520

13. Miscellaneous Objections.520

Conclusion. .520

In this contested matter in the jointly administered chapter 11 cases of Debtors General Motors Corporation and certain of its subsidiaries (together, “GM”), the Debtors move for an order, pursuant to section 363 of the Bankruptcy Code, approving GM’s sale of the bulk of its assets (the “363 Transaction”), pursuant to a “Master Sale and Purchase Agreement” and related documents (the “MPA”), to Vehicle Acquisitions Holdings LLC (the “Purchaser”) 2 • — -a purchaser sponsored by the U.S. Department of the Treasury (the “U.S. Treasury”) — free and clear of liens, claims, encumbrances, and other interests. The Debtors also seek approval of the assumption and assignment of the executo-ry contracts that would be needed by the Purchaser, and of a settlement with the United Auto Workers (“UAW”) pursuant to an agreement (the “UAW Settlement Agreement”) under which GM would satisfy obligations to an estimated 500,000 retirees.

GM’s motion is supported by the Creditors’ Committee; the U.S. Government (which has advanced approximately $50 billion to GM, and is GM’s largest pre- and post-petition creditor); the Governments of Canada and Ontario (which ultimately will have advanced about $9.1 billion); the UAW (an affiliate of which is GM’s single largest unsecured creditor); *474 the indenture trustees for GM’s approximately $27 billion in unsecured bonds; and an ad hoc committee representing holders of a majority of those bonds.

But the motion has engendered many objections and limited objections, by a variety of others. The objectors include, among others, a minority of the holders of GM’s unsecured bonds (most significantly, an ad hoc committee of three of them (the “F & D Bondholders Committee”), holding approximately .01% of GM’s bonds), 3 who contend, among other things, that GM’s assets can be sold only under a chapter 11 plan, and that the proposed section 363 sale amounts to an impermissible “sub rosa ” plan.

Objectors and limited objectors also include tort litigants who object to provisions in the approval order limiting successor liability claims against the Purchaser; asbestos litigants with similar concerns, along with concerns as to asbestos ailments that have not yet been discovered; and non-UAW unions (“Splinter Unions”) speaking for their retirees, concerned that the Purchaser does not plan to treat their retirees as well as the UAW’s retirees.

On the most basic issue, whether a 363 sale is proper, GM contends that this is exactly the kind of case where a section 363 sale is appropriate and indeed essential — and where under the several rulings of the Second Circuit and the Supreme Court in this area, GM’s business can be sold, and its value preserved, before the company dies. The Court agrees. GM cannot survive with its continuing losses and associated loss of liquidity, and without the governmental funding that will expire in a matter of days. And there are no options to this sale — especially any premised on the notion that the company could survive the process of negotiations and litigation that characterizes the plan confirmation process.

As nobody can seriously dispute, the only alternative to an immediate sale is liquidation — a disastrous result for GM’s creditors, its employees, the suppliers who depend on GM for their own existence, and the communities in which GM operates. In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.

Neither the Code, nor the caselaw— especially the caselaw in the Second Circuit — requires waiting for the plan confirmation process to take its course when the inevitable consequence would be liquidation. Bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve — to prevent the death of the patient on the operating table.

Nor can the Court accept various objectors’ contention that there here is a sub rosa plan. GM’s assets simply are being sold, with the consideration to GM to be hereafter distributed to stakeholders, consistent with their statutory priorities, under a subsequent plan. Arrangements that will be made by the Purchaser do not affect the distribution of the Debtor’s property, and will address wholly different needs and concerns — arrangements that the Purchaser needs to create a new GM *475 that will be lean and healthy enough to survive.

Issues as to how any approval order should address successor liability are the only truly debatable issues in this case. And while textual analysis is ultimately inconclusive and caselaw on a nationwide basis is not uniform, the Court believes in stare decisis; it follows the caselaw in this Circuit and District in holding that to the extent the Purchaser has not voluntarily agreed to accept successor liability, GM’s property — like that of Chrysler, just a few weeks ago — may be sold free and clear of claims.

Those and other issues are addressed below. GM’s motion is granted. The following are the Court’s Findings of Fact, Conclusions of Law, and bases for the exercise of its discretion in connection with this determination.

Findings of Fact 4

After an evidentiary hearing, 5 the Court makes the following Findings of Fact.

1. Background

GM is primarily engaged in the worldwide production of cars, trucks, and parts. It is the largest Original Equipment Manufacturer (“OEM”) in the U.S., and the second largest in the world.

GM has marketed cars and trucks under many brands — most of them household names in the U.S. — including Buick, Cadillac, Chevrolet, Pontiac, GMC, Saab, Saturn, HUMMER, and Opel. It operates in virtually every country in the world.

GM maintains its executive offices in Detroit, Michigan,- and its major financial and treasury operations in New York, New York. As of March 31, 2009, GM employed approximately 235,000 employees worldwide, of whom 163,000 were hourly employees and 72,000 were salaried. Of GM’s 235,000 employees, approximately 91,000 are employed in the U.S. Approximately 62,000 (or 68%) of those U.S. employees were represented by unions as of March 31, 2009. The UAW represents by far the largest portion of GM’s U.S. unionized employees, representing approximately 61,000 employees.

As of March 31, 2009, GM had consolidated reported global assets and liabilities of approximately $82 billion, and $172 billion, respectively. However, its assets appear on its balance sheet at book value, as contrasted to a value based on any kind of valuation or appraisal. And if GM had to be liquidated, its liquidation asset value, as discussed below, would be less than 10% of that $82 billion amount.

While GM has publicly traded common stock, no one in this chapter 11 case has seriously suggested that GM’s stock is “in the money,” or anywhere close to that. By any standard, there can be no doubt that GM is insolvent. In fact, as also discussed below, if GM were to liquidate, its unsecured creditors would receive nothing on their claims.

2. GM’s Dealer Network

Substantially all of GM’s worldwide car and truck deliveries (totaling 8.4 million vehicles in 2008) are marketed through independent retail dealers or distributors. *476 GM relies heavily on its relationships with dealers, as substantially all of its retail sales are through its network of independent retail dealers and distributors.

The 363 Transaction contemplates the assumption by GM and the assignment to New GM of dealer franchise agreements relating to approximately 4,100 of its 6,000 dealerships, modified in ways to make GM more competitive (as modified, “Participation Agreements”). But GM cannot take all of the dealers on the same basis. At the remaining dealer’s option, GM will either reject those agreements, or assume modified agreements, called “Deferred Termination Agreements.”

The Deferred Termination Agreements will provide dealers with whom GM cannot go forward a softer landing and orderly termination. GM is providing approximately 17 months’ notice of termination.

As of the time of the hearing on this motion, approximately 99% of the continuing dealers had signed Participation Agreements and 99% of the dealers so affected had signed Deferred Termination Agreements.

The agreements of both types include waivers of rights that dealers would have in connection with their franchises. In accordance with a settlement with the Attorneys General of approximately 45 states (the “AGs”), the Debtors and the Purchaser agreed to modifications to the Purchase Agreement and the proposed approval order under which (subject to the more precise language in the proposed order) the Court makes no finding as to the extent any such modifications are enforceable, and any disputes as to that will be resolved locally.

3. GM’s Suppliers

As the nation’s largest automobile manufacturer, GM uses the services of thousands of suppliers — -resulting in approximately $50 billion in annual supplier payments. In North America alone, GM uses a network of approximately 11,500 suppliers. In addition, there are over 600 suppliers whose sales to GM represent over 30% of their annual revenues. Thus hundreds, if not thousands, of automotive parts suppliers depend, either in whole or in part, on GM for survival.

Jp. GM’s Financial Distress

Historically, GM was one of the best performing OEMs in the U.S. market. But with the growth of competitors with far lower cost structures and dramatically lower benefit obligations, GM’s leadership position in the U.S. began to decline. At least as a result of that lower cost competition and market forces in the U.S. and abroad (including jumps in the price of gasoline; a massive recession (with global dislocation not seen since the 1930s); a dramatic decline in U.S. domestic auto sales; and a freeze-up in consumer and commercial credit markets), GM suffered a major drop in new vehicle sales and in market share — from 45% in 1980 to a forecast 19.5% in 2009.

The Court does not need to make further factual findings as to the many causes for GM’s difficulties, and does not do so. Observers might differ as to the causes or opine that there were others as well, and might differ especially with respect to which causes were most important. But what is clear is that, especially in 2008 and 2009, GM suffered a steep erosion in revenues, significant operating losses, and a dramatic loss of liquidity, putting its future in grave jeopardy.

5. U.S. Government Assistance

By the fall of 2008, GM was in the midst of a severe liquidity crisis, and its ability to continue operations grew more and more *477 uncertain with each passing day. As a result, in November 2008, GM was compelled to seek financial assistance from the U.S. Government.

The U.S. Government understood the draconian consequences of the situation— one that affected not just GM, but also Chrysler, and to a lesser extent, Ford (the “Big Three”). And the failure of any of the Big Three (or worse, more than one of them) might well bring grievous ruin on the thousands of suppliers to the Big Three (many of whom have already filed their own bankruptcy eases, in this District, Delaware, Michigan and elsewhere); other businesses in the communities where the Big Three operate; dealers throughout the country; and the states and municipalities who looked to the Big Three, their suppliers and their employees for tax revenues.

The U.S. Government’s fear — a fear this Court shares, if GM cannot be saved as a going concern — was of a systemic failure throughout the domestic automotive industry and the significant harm to the overall U.S. economy that would result from the loss of hundreds of thousands of jobs 6 and the sequential shutdown of hundreds of ancillary businesses if GM had to cease operations.

Thus in response to the troubles plaguing the American automotive industry, the U.S. Government, through the U.S. Treasury and its Presidential Task Force on the Auto Industry (the “Auto Task Force”), implemented various programs to support and stabilize the domestic automotive industry' — including support for consumer warranties and direct loans. Thus at GM’s request in late 2008, the U.S. Treasury determined to make available to GM billions of dollars in emergency secured financing in order to sustain GM’s operations while GM developed a new business plan. At the time that the U.S. Treasury first extended credit to GM, there was absolutely no other source of financing available. No party other than Treasury conveyed its willingness to loan funds to GM and thereby enable it to continue operating.

The first loan came in December 2008, after GM submitted a proposed viability plan to Congress. That plan contemplated GM’s shift to smaller, more fuel-efficient cars, a reduction in the number of GM brand names and dealerships, and a renegotiation of GM’s agreement with its principal labor union. As part of its proposed plan, GM sought emergency funding in the form of an $18 billion federal loan.

But the U.S. Government was not of a mind to extend a loan that large, and after negotiations, the U.S. Treasury and GM entered into a term loan agreement on December 31, 2008 (the “Treasury Prepet-ition Loan”), that provided GM up to $13.4 billion in financing on a senior secured basis. Under that facility, GM immediately borrowed $4 billion, followed by $5.4 billion less than a month later, and the remaining $4 billion on February 17,2009.

At the time this loan was made, GM was in very weak financial condition, and the loan was made under much better terms than could be obtained from any commercial lender — if any lender could have been found at all. But the Court has no doubt whatever, and finds, that the Treasury Prepetition Loan was intended to be, and was, a loan and not a contribution of equity. As contrasted with other TARP transactions that involved the U.S. Treasury making direct investments in troubled *478 companies in return for common or preferred equity, the U.S. Treasury structured the Treasury Prepetition Loan as a loan with the only equity received by the U.S. Treasury being in the form of two warrants. The agreement had terms and covenants of a loan rather than an equity investment. The U.S. Treasury sought and received first liens on many assets, and second liens on other collateral. The transaction also had separate collateral documents. And the U.S. Treasury entered into intercreditor agreements with GM’s other senior secured lenders in order to agree upon the secured lenders’ respective prepetition priorities.

The Court farther finds, as a fact or mixed question of fact and law, looking at the totality of the circumstances, that there was nothing inequitable about the way the U.S. Treasury behaved in advancing these funds. Nor did the U.S. Treasury act inequitably to GM’s creditors, who were assisted, and not injured, by the U.S. Treasury’s efforts to keep GM alive and to forestall a liquidation of the company.

GM had provided a business plan to Congress under which GM might restore itself to profitability, but it was widely perceived to be unsatisfactory. The U.S. Treasury required GM to submit a proposed business plan to demonstrate its future competitiveness that went significantly farther than the one GM had submitted to Congress. As conditions to the U.S. Treasury’s willingness to provide financing, GM was to:

(i)reduce its approximately $27 billion in unsecured public debt by no less than two-thirds;

(ii) reduce its total compensation to U.S. employees so that by no later than December 31, 2009, such compensation would be competitive with Nissan, Toyota, or Honda in the U.S.;

(iii) eliminate compensation or benefits to employees who had been discharged, furloughed, or idled, other than customary severance pay;

(iv) apply, by December 31, 2009, work rules for U.S. employees in a manner that would be competitive with the work rules for employees of Nissan, Toyota, or Honda in the U.S.; and

(v) make at least half of the $20 billion contribution that GM was obligated to make to a VEBA 7 Trust for UAW retirees (“VEBA Trust”) in the form of common stock, rather than cash.

Thereafter, in March 2009, Treasury indicated that if GM was unable to complete an effective out-of-court restructuring, it should consider a new, more aggressive, viability plan under an expedited Court-supervised process to avoid further erosion of value. In short, GM was to file a bankruptcy petition and take prompt measures to preserve its value while there was still value to save.

The Treasury Prepetition Loan agreement (whose formal name was “Loan and Security Agreement,” or “LSA”) provided that, if, by March 31, 2009, the President’s designee hadn’t issued a certification that GM had taken all steps necessary to achieve long-term viability, then the loans due to Treasury would become due and payable 30 days thereafter. And on March 30, the President announced that the viability plan proposed by GM was not *479 satisfactory, and didn’t justify a substantial new investment of taxpayer dollars.

But rather than leaving GM to simply go into liquidation, the President stated that the U.S. Government would provide assistance to avoid such a result, if GM took the necessary additional steps to justify that assistance — including reaching agreements -with the UAW, GM’s bondholders, and the VEBA Trust. The conditions to federal assistance required substantial debt reduction and the submission of a revised business plan that was more aggressive in both scope and timing.

As an alternative to liquidation, the President indicated that the U.S. Treasury would extend to GM adequate working capital for a period of another 60 days to enable it to continue operations. And as GM’s largest secured creditor, the U.S. Treasury would negotiate with GM to develop and implement a more aggressive and comprehensive viability plan. The President also stated that GM needed a “fresh start to implement the restructuring plan,” which “may mean using our [Bankruptcy [C]ode as a mechanism to help [it] restructure quickly and emerge stronger.” The President explained:

What I’m talking about is using our existing legal structure as a tool that, with the backing of the U.S. Government, can make it easier for General Motors ... to quickly clear away old debts that are weighing [it] down so that [it] can get back on [its] feet and onto a path to success; a tool that we can use, even as workers stay on the job building cars that are being sold.

What I’m not talking about is a process where a company is simply broken up, sold off, and no longer exists. We’re not talking about that. And what I’m not talking about is a company that’s stuck in court for years, unable to get out. 8

The U.S. Treasury and GM subsequently entered into amended credit agreements for the Treasury Prepetition Loan to provide for an additional $2 billion in financing that GM borrowed on April 24, 2009, and another $4 billion that GM borrowed on May 20, 2009. The funds advanced to GM under the Treasury Prepetition Loan — ultimately $19.4 billion in total (all on a senior secured basis) — permitted GM to survive through the date of the filing of its bankruptcy case.

On June 1, 2009 (the “Filing Date”), GM filed its chapter 11 petition in this Court.

6. GM’s First Quarter Results

On May 8, 2009, about three weeks before the Filing Date, GM announced its first quarter 2009 results. They presented a grim financial picture, and equally grim trends. Specifically:

(a) GM’s total net revenue decreased by $20 billion (or 47.1%) in the first three months of 2009, as compared to the corresponding period in 2008;

(b) Operating losses increased by $5.1 billion from the prior quarter;

(c) During this same period, GM had negative cash flow of $9.4 billion;

(d) Available liquidity deteriorated by $2.6 billion; and

(e) Sales by GM dealers in the U.S. fell to approximately 413,000 vehicles in that first quarter — a decline of approximately 49% as compared to the corresponding period in 2008.

7. The 363 Transaction

As noted above, in connection with providing financing, Treasury advised GM *480 that, if an out-of-court restructuring was not possible, 9 GM should consider the bankruptcy process. That would enable GM to implement a transaction under which substantially all GM’s assets would be purchased by a Treasury-sponsored purchaser (subject to any higher or better offer), in an expedited process under section 363 of the Code.

Under this game plan, the Purchaser would acquire the purchased assets; create a New GM; and operate New GM free of any entanglement with the bankruptcy cases. If the sale could be accomplished quickly enough, before GM’s value dissipated as a result of continuing losses and consumer uncertainty, the 363 sale would thereby preserve the going concern value; avoid systemic failure; provide continuing employment; protect the many communities dependent upon the continuation of GM’s business, and restore consumer confidence.

To facilitate the process, the U.S. Treasury and the governments of Canada and Ontario (through their Export Development Canada (“EDC”)) 10 agreed to provide DIP financing for GM through the chapter 11 process. But they would provide the DIP financing only if the sale of the purchased assets occurred on an expedited basis. That condition was imposed to:

(i) preserve the value of the business;

(ii) restore (or at least minimize further loss of) consumer confidence;

(in) mitigate the increasing damage that GM itself, and the industry, would suffer if GM’s major business operations were to remain in bankruptcy; and

(iv) avoid the enormous costs of financing a lengthy chapter 11 case.

Treasury also agreed to provide New GM with adequate post-acquisition financing.

Importantly, the DIP financing to be furnished by the U.S. Treasury and EDC is the only financing that is available to GM. The U.S. Treasury (with its Canadian EDC co-lender) is the only entity that is willing to extend DIP financing to GM. Other efforts to obtain such financing have been unsuccessful. Absent adequate DIP financing, GM will have no choice but to liquidate. But the U.S. Government has stated it will not provide DIP financing without the 363 Transaction, and the DIP financing will come to an end if the 363 Transaction is not approved by July 10. Without such financing, these cases will plunge into a liquidation.

Alternatives to a sale have turned out to be unsuccessful, and offer no hope of success now. In accordance with standard section 363 practice, the 363 Transaction was subject to higher and better offers, but none were forthcoming. The Court finds this hardly surprising. Only the U.S. and Canadian Governmental authorities were prepared to invest in GM — and then not so much by reason of the economic merit of the purchase, but rather to address the underlying societal interests in preserving jobs and the North American auto industry, the thousands of suppliers to that industry, and the health of the communities, in the U.S. and Canada, in which GM operates.

In light of GM’s substantial secured indebtedness, approximately $50 billion, the only entity that has the financial wherewithal and is qualified to purchase the *481 assets — and the only entity that has stepped forward to make such a purchase — is the U.S. Treasury-sponsored Purchaser. But the Purchaser is willing to proceed only under an expedited sale process under the Bankruptcy Code.

8. The Liquidation Alternative

In connection with its consideration of alternatives, GM secured an analysis (the “Liquidation Analysis”), prepared by AlixPartners LLP, of what GM’s assets would be worth in a liquidation. The Liquidation Analysis concluded that the realizable value of the assets of GM (net of the costs of liquidation) would range between approximately $6 billion and $10 billion. No evidence has been submitted to the contrary. This was in the context of an assumed $116.5 billion in general unsecured claims, though this could increase with lease and contract rejection claims and pension termination claims.

While the Liquidation Analysis projected some recoveries for secured debt and administrative and priority claims, it concluded that there would be no recovery whatsoever for unsecured creditors. The Court has no basis to doubt those conclusions. The Court finds that in the event of a liquidation, unsecured creditors would recover nothing.

9. Fairness of the Transaction

Before the 363 Transaction was presented for Court approval, GM’s Board of Directors (the “Board”) (all but one of whose members were independent, and advised by the law firm of Cravath, Swaine & Moore), received a fairness opinion, dated May 31, 2009 (the “Fairness Opinion”), from Evercore Group L.L.C. (“Evercore”).

The Fairness Opinion’s conclusion was that the purchase price was fair to GM, from a financial point of view. No contrary evidence has been submitted to the Court.

10.Specifics of the Transaction

The sale transaction, as embodied in the MPA and related documents, is complex. Its “deal points” can be summarized as follows:

(a) Acquired and Excluded Assets

Under the Sale, New GM will acquire all of Old GM’s assets, with the exception of certain assets expressly excluded under the MPA (respectively, the “Purchased Assets” and the “Excluded Assets”). The Excluded Assets chiefly consist of:

(i) $1.175 billion in cash or cash equivalents;

(ii) equity interests in certain Saturn and other entities;

(iii) certain real and personal property;

(iv) bankruptcy avoidance actions;

(v) certain employee benefit plans; and

(vi) certain restricted cash and receivables.

(b) Assumed and Excluded Liabilities

Old GM will retain all liabilities except those defined in the MPA as “Assumed Liabilities.” The Assumed Liabilities include:

(i) product liability claims arising out of products delivered at or after the Sale transaction closes (the “Closing ”);

(ii) the warranty and recall obligations of both Old GM and New GM;

(iii) all employment-related obligations and liabilities under any assumed employee benefit plan relating to employees that are or were covered by the UAW collective bargaining agreement;

and — by reason of an important change that was made in the MPA after the filing of the motion—

*482 (iv)broadening the first category substantially, all product liability claims arising from accidents or other discrete incidents arising from operation of GM vehicles occurring subsequent to the closing of the 363 Transaction, regardless of when the product was purchased.

The liabilities being retained by Old GM include:

(i) product liability claims arising out of products delivered prior to the Closing (to the extent they weren’t assumed by reason of the change in the MPA after the filing of objections);

(ii) liabilities for claims arising out of exposure to asbestos;

(iii) liabilities to third parties for claims based upon “[cjontract, tort or any other basis”;

(iv) liabilities related to any implied warranty or other implied obligation arising under statutory or common law; and

(v) employment-related obligations not otherwise assumed, including, among other obligations, those arising out of the employment, potential employment, or termination of any individual (other than an employee covered by the UAW collective bargaining agreement) prior to or at the Closing.

(c) Consideration

Old GM is to receive consideration estimated to be worth approximately $45 billion, plus the value of equity interests that it will receive in New GM. It will come in the following forms:

(i) a credit bid by the U.S. Treasury and EDC, who will credit bid the majority of the indebtedness outstanding under their DIP facility and the Treasury Prepetition Loan;

(ii) the assumption by New GM of approximately $6.7 billion of indebtedness under the DIP facilities, plus an additional $1,175 billion to be advanced by the U.S. Treasury under a new DIP facility (the “Wind Down Facility”) whose proceeds will be used by Old GM to wind down its affairs;

(iii) the surrender of the warrant that had been issued by Old GM to Treasury in connection with the Treasury Prepetition Loan;

(iv) 10% of the post-closing outstanding shares of New GM, plus an additional 2% if the estimated amount of allowed prepetition general unsecured claims against Old GM exceeds $35 billion;

(v) two warrants, each to purchase 7.5% of the post-closing outstanding shares of New GM, with an exercise price based on a $15 billion equity valuation and a $30 billion equity valuation, respectively; and

(vi) the assumption of liabilities, including those noted above.

(d) Ownership of New GM

Under the terms of the Sale, New GM will be owned by four entities.

(i) Treasury will own 60.8% of New GM’s common stock on an undiluted basis. It also will own $2.1 billion of New GM Series A Preferred Stock;

(ii) EDC will own 11.7% of New GM’s common stock on an undiluted basis. It also will own $400 million of New GM Series A Preferred Stock;

(iii) A New Employees’ Beneficiary Association Trust (“New VEBA”) will own 17.5% of New GM’s common stock on an undiluted basis. It also will own $6.5 billion of New GM’s Series A Preferred Stock, and a 6-year warrant to acquire 2.5% of New GM’s common stock, with an exercise price based on $75 billion total equity value; and

*483 (iv) Finally, if a chapter 11 plan is implemented as contemplated under the structure of the Sale transaction, Old GM will own 10% of New GM’s common stock on an undiluted basis. In addition, if the allowed prepetition general unsecured claims against Old GM exceed $35 billion, Old GM will be issued an additional 10 million shares, amounting to approximately 2% of New GM’s common stock. Old GM will also own the two warrants mentioned above.

(e) Other Aspects of Transaction

New GM will make an offer of employment to all of the Sellers’ non-unionized employees and unionized employees represented by the UAW. Substantially all of old GM’s executory contracts with direct suppliers are likely to be assumed and assigned to New GM.

After the Closing, New GM will assume all liabilities arising under express written emission and limited warranties delivered in connection with the sale of new vehicles or parts manufactured or sold by Old GM.

One of the requirements of the U.S. Treasury, imposed when the Treasury Prepetition Loan was put in place, was the need to negotiate a new collective bargaining agreement which would allow GM to be fully competitive, and “equitize” — ie., convert to equity — at least one half of the obligation GM had to the UAW VEBA. Ultimately GM did so. New GM will make future contributions to the New VEBA that will provide retiree health and welfare benefits to former UAW employees and their spouses. Also, as part of the 363 Transaction, New GM will be the assignee of revised collective bargaining agreements with the UAW, the terms of which were recently ratified — though contingent upon the approval of the entirety of these motions.

(f) The Proposed Sale Order

Though GM’s request has been narrowed, as noted above, to provide that New GM will assume liability for product liability claims arising from operation of GM vehicles occurring after the closing of the 363 Transaction (regardless of when the product was purchased), GM asks this Court, as in the Chrysler case, to authorize the Sale free and clear of all other “liens, claims, encumbrances and other interests,” including, specifically, “all successor liability claims.”

To effectuate this result, GM has submitted a proposed order to the Court (the “Proposed Sale Order”) that contains provisions directed at cutting off successor liability except in the respects where successor liability was contractually assumed.

First, the Proposed Sale Order contains a finding — and a decretal provision to similar effect — that the Debtors may sell the Purchased Assets free and clear of all liens, claims, encumbrances, and other interests, including rights or claims based on any successor or transferee liability.

Second, the Proposed Sale Order would enjoin all persons (including “litigation claimants”) holding liens, claims, encumbrances, and other interests, including rights or claims based on any successor or transferee liability, from asserting them against New GM or the Purchased Assets. 11

11. Contingent Liabilities

Certain types of GM liabilities are contingent and difficult to quantify. GM’s most recent quarterly report noted present valued contingent liabilities of $934 million for product liability, $627 million *484 for asbestos liability, $307 million for other litigation liability, and $294 million for environmental liability.

12. Agreement with UAW

Workers in the U.S. do not have government provided healthcare benefits of the type that the employees of many of GM’s foreign competitors do. Over the years, GM and the other members of the Big Three committed themselves to offer many of those healthcare benefits, resulting in decreased competitiveness and enormous liabilities. GM tried to reduce the costs of healthcare benefits for its employees, but these costs continued to substantially escalate. Many of these costs were in the form of obligations to pay healthcare costs of union employees on retirement.

In 2007 and 2008, GM settled various controversies with respect to its healthcare obligations by entering into an agreement (the “2008 UAW Settlement Agreement”), generally providing that responsibility for providing retiree healthcare would permanently shift from GM to a new plan that was independent of GM. GM would no longer have to pay for the benefits themselves, but instead would have to make specified contributions aggregating approximately $20.56 billion to be made by GM into the VEBA Trust. The 2008 UAW Settlement Agreement, therefore, fixed and capped GM’s obligations — but in a very large amount.

As part of the 363 Transaction, the Purchaser and the UAW have reached a resolution addressing the ongoing provision of those benefits. New GM will make contributions to the New VEBA, which will have the obligation to fund the UAW retiree health and welfare benefits. And under the “UAW Retiree Settlement Agreement,” New GM will put value into the New VEBA, which will then have the obligation to fund retiree medical benefits for the Debtors’ retirees and surviving spouses represented by the UAW (the “UAW-Represented Retirees”).

New GM will also assume modified and duly ratified collective bargaining agreements entered into by and between the Debtors and the UAW.

13. Need for Speed

GM and the U.S. Treasury say that the 363 Transaction must be approved and completed quickly. The Court finds that they are right.

Absent prompt confirmation that the sale has been approved and that the transfer of the assets will be implemented, GM will have to liquidate. There are no realistic alternatives available.

There are no merger partners, acquirers, or investors willing and able to acquire GM’s business. Other than the U.S. Treasury and EDO, there are no lenders willing and able to finance GM’s continued operations. Similarly, there are no lenders willing and able to finance GM in a prolonged chapter 11 case.

The continued availability of the financing provided by Treasury is expressly conditioned upon approval of this motion by July 10, and prompt closing of the 363 Transaction by August 15. Without such financing, GM faces immediate liquidation.

The Court accepts as accurate and truthful the testimony by GM CEO Fritz Henderson at the hearing:

Q. Now, if the U.S. Treasury does not fund on July 10th and the sale order is not entered by that date, what options are there for GM at that point?

A. Well, if they don’t continue, we would liquidate. 12

*485 The July 10 deadline is important because the U.S. Treasury, like GM itself, has been very concerned about the business status of the company in a bankruptcy process. 13 GM did worse than expected in fleet sales in June, as fleet sales customers pulled back their orders because they didn’t know their status in the bankruptcy. Although the company did better on retail sales than expected in June, it did so for a number of reasons, one of which was the expectation that the chapter 11 case would move quickly, and that the company, in the 363 process, would be successful. 14 And results were “still terrible.” 15

Even if funding were available for an extended bankruptcy case, many consumers would not consider purchasing a vehicle from a manufacturer whose future was uncertain and that was entangled in the bankruptcy process.

Thus the Court agrees that a lengthy chapter 11 case for the Debtors is not an option. It also agrees with the Debtors and the U.S. Government that it is not reasonable to expect that a reorganization plan could be confirmed in the next 60 days (i.e., 90 days from the Filing Date).

The Auto Task Force talked to dozens of experts, industry consultants, people who had observed General Motors for decades, management, and people who were well versed in the bankruptcy process as part of its planning and work on this matter. None of them felt that GM could survive a traditional chapter 11 process. The Auto Task Force learned of views by one of the leading commentators on GM that GM would be making a tragic mistake by pursuing a bankruptcy filing. It became clear to the Auto Task Force that a bankruptcy with a traditional plan confirmation process would be so injurious to GM as to not allow for GM’s viability going forward. 16

The Court accepts this testimony, and so finds. A 90 day plan confirmation process would be wholly unrealistic. In fact, the notion that a reorganization with a plan confirmation could be completed in 90 days in a case of this size and complexity is ludicrous, especially when one is already on notice of areas of likely controversy.

Ik. Ultimate Facts

The Court thus makes the following findings of ultimate facts:

1. There is a good business reason for proceeding with the 363 Transaction now, as contrasted to awaiting the formulation and confirmation of a chapter 11 plan.

2. There is an articulated business justification for proceeding with the 363 Transaction now.

3. The 363 Transaction is an appropriate exercise of business judgment.

4. The 363 Transaction is the only available means to preserve the continuation of GM’s business.

5. The 363 Transaction is the only available means to maximize the value of GM’s business.

6. There is no viable alternative to the 363 Transaction.

7. The only alternative to the 363 Transaction is liquidation.

8. No unsecured creditor will here get less than it would receive in a liquidation.

9. The UAW Settlement is fair and equitable, and is in the best inter *486 ests of both the estate and UAW members.

10. The secured debt owing to the U.S. Government and EDC (both post-petition and, to the extent applicable, prepetition) is not subject to recharacterization as equity or equitable subordination, and could be used for a credit bid.

11. The Purchaser is a purchaser in good faith.

Discussion

The substantive objections break down into a number of categories by concept, and the Court thus considers them in that fashion.

1. Sale Under Section 363

Determining the propriety of the 363 Transaction requires confirming that section 363 can be utilized for the sale of this much of GM’s assets before confirmation of a reorganization plan; that the necessary showings for approval of any section 363 sale have been made; that the 363 Transaction is not a “sub rosa ” plan; and that various related issues have been satisfactorily resolved. The Court considers these in turn.

(a) Utilization of Section 363 <