GM seeks court approval for sale

By Emily Chasan and Phil Wahba

NEW YORK (Reuters) - If General Motors GMGMQ.PK 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 on Wednesday.

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 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 (20 billion pounds) "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."

GM was in the second day of a bankruptcy court hearing in Manhattan in which it is asking Judge Robert Gerber to approve a sale of its best assets to New GM, just one month after filing for Chapter 11 bankruptcy.

At the beginning of the hearing, lawyers for a group of dissenting bondholders asked GM restructuring adviser Bill Repko, of the investment bank Evercore, and Wilson, a senior member of the Obama administration's autos task force, whether GM could have pursued a traditional reorganization rather than a speedy sale of its assets to New GM.

"There was a constant dialogue in thinking through our options," Wilson said, but the government concluded that a sale was the "only viable path forward for the company."

"We could not find any reasonable measure of opinion from anyone ... who felt that General Motors could survive a traditional Chapter 11," Wilson told the court.