Speaker 1: When General Motors came out of bankruptcy in two thousand nine,
Speaker 1: it left behind a shell of its old self. The
Speaker 1: shell known as Old GM, was set up to handle
Speaker 1: lingering legal claims, including lawsuits over faulty ignition switches. The
Speaker 1: financial arrangements. However, we're complicated, and over the past week
Speaker 1: they fostered a billion dollar disagreement. First, New GM, that's
Speaker 1: the company that still makes cars, accused Old GM of
Speaker 1: secretly plotting with with plaintiff's attorneys to extract more money
Speaker 1: from the automaker. Now New GM has reached a deal
Speaker 1: with Old GM, and that has plaintiffs lawyers crying foul.
Speaker 1: With us. To help explain all of this is Eric Gordon.
Speaker 1: He's a professor at the University of Michigan's Ross School
Speaker 1: of Business and he's with us in our Chicago studio. Eric,
Speaker 1: thanks for being with us. UM. This is kind of
Speaker 1: complicated stuff, So just start, if you would, by explaining
Speaker 1: exactly what old GM is and what its obligations and
Speaker 1: and motivations are. Old GM is a creature of the
Speaker 1: bankruptcy reorganization. In In that reorganization, GM is basically split
Speaker 1: into two pieces. Old GM now referred to as the trust.
Speaker 1: UM got a certain amount of money, a lot of money,
Speaker 1: billions of dollars, and some property. It got some old
Speaker 1: plants and some property, and it's a liquidating trust. It's
Speaker 1: designed to pay off the obligations that had to be
Speaker 1: paid off under the agreement, the bankruptcy agreement. New GM,
Speaker 1: or what you and I think of as GM today,
Speaker 1: got spun off as supposedly a clean, new, fresh start entity.
Speaker 1: That's the purpose of bankruptcy reorganization UM, so that you
Speaker 1: know it could still make cars and still employ people.
Speaker 1: Turns out it hasn't been one fresh start. There's some
Speaker 1: there's some dangling kind of threads here, UM, including the
Speaker 1: billion dollar thread you mentioned Eric. Last week, we understood
Speaker 1: and there was a report that GM had old GM,
Speaker 1: that trust had settled with plaintiffs lawyers. What happened? Yeah,
Speaker 1: So apparently apparently the old GM, the trust, and the
Speaker 1: plaintiffs lawyers, who have you been involved in some lengthy
Speaker 1: settlement negotiations over some big big bucks got together and
Speaker 1: finally hammered out a deal they were happy with. They
Speaker 1: being those two old GM and the plaintiffs lawyers. Apparently
Speaker 1: UM New GM was not involved in that wasn't part
Speaker 1: of the negotiations. UH and found out that as part
Speaker 1: of those negotiations, the two parties, Old GM and the
Speaker 1: trust O g M and the plans managed to hammer
Speaker 1: out a deal which pulls one of those threads, the
Speaker 1: billion dollar thread UM and GM. New GM is not
Speaker 1: happy about that for a number of reasons. I mean,
Speaker 1: maybe for a billion reasons, but for some you know,
Speaker 1: very specific reasons. And so now we have a new
Speaker 1: agreement that I guess maybe supersedes the old old agreement.
Speaker 1: This is between new GM and old GM. Tell us
Speaker 1: about about that. So the old agreement apparently was never signed,
Speaker 1: certainly wasn't approved by the court. UM New GM voiced
Speaker 1: in some very strong words, it's disapproval of that agreement,
Speaker 1: and it's a disapproval of the conduct of both the
Speaker 1: plaintiffs lawyers and old GM in reaching it. Apparently got
Speaker 1: together with old GM. Um and made its displeasure clear,
Speaker 1: but also made Old GM and offer it didn't want
Speaker 1: to refuse, which is UM. Look, we will UH cover
Speaker 1: legal feest to litigate some issues we New GM want
Speaker 1: to have litigated. You weren't going to litigate them. Who
Speaker 1: knows why GM suspects there was a little sort of
Speaker 1: hand holding between old GM and the plaintiffs, but even
Speaker 1: if not, maybe old GM just didn't want to spend
Speaker 1: the money. So new GM said, Okay, we'll here, we'll
Speaker 1: bring something to the table. We'll cover some legal fees.
Speaker 1: And under this new agreement between old and new GM,
Speaker 1: this time the plaintiffs lawyers are left out. Um, new
Speaker 1: GM is going to cover some legal fees and apparently
Speaker 1: all GM is going to litigate some defenses that the
Speaker 1: GM hopes will prevail and keep it from having to
Speaker 1: pay that billion dollars. Eric, I understand the judge scolded
Speaker 1: all the lawyers on on all the sides out of hearing.
Speaker 1: Why ye, Well, for two reasons. One, judges like settlements,
Speaker 1: especially settlements that have been you know, underway for quite
Speaker 1: a long time. You'll walk into a judge's courtroom at
Speaker 1: the last minute and say, oaps, look the settlement that
Speaker 1: we've been working on forever. Uh, nope, we've got We've
Speaker 1: got something new. So so Judge Glenn. Judge Glenn, like
Speaker 1: any judge, is not happy about that. But the plaintiffs lawyers,
Speaker 1: a plaintiffs lawyer at least ed wise fell in there,
Speaker 1: Um referred to, well, it must have been the result
Speaker 1: of threats, some pretty heavy duty threats that GM made,
Speaker 1: New GM made to old GM. Um. He did admit
Speaker 1: that he doesn't know that those threats exist, but but
Speaker 1: he he said that sort of they must have. So
Speaker 1: the judge got pretty angry about that and has ordered
Speaker 1: both sides to produce evidence that there were or were
Speaker 1: not threats. Um so that the judge, you know, and
Speaker 1: they just just blew up into Judge's face and he
Speaker 1: is not a happy guy. We're gonna have to leave
Speaker 1: it there, Thank you so much. Eric Gordon and the
Speaker 1: professor at the University of Michigan's Ross School of Business.
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