DETROIT (Reuters) –
General Motors Corp (
In addition, GM said it would change the terms of its proposed asset sale to address objections raised by over 20 suppliers and was working to resolve a question over the future of a joint-venture plant with Toyota Motor Corp (7203.T).
The statements by GM, which came in filings with a New York bankruptcy court on Friday, show how the automaker and Obama administration officials have worked to counter some of the more contentious issues raised by the company's bankruptcy filing earlier this month.
A group of nine state attorneys general, including Ohio and Connecticut, had objected to the GM reorganization brokered by the Obama administration because it would have robbed consumers of protections against product defects under state laws.
In response, GM said it would continue to pay "lemon law" claims so that consumers would be entitled to a refund or replacement for defective vehicles.
GM also said that the reorganized company, which will be effectively nationalized with a $50 billion investment from the U.S. Treasury, would assume liability for future product defect claims in a change negotiated with government officials.
"The purchaser will expressly assume all product liability claims arising from accidents or other ... incidents arising from the operation of GM vehicles subject to the closing," GM said in its court filing.
'CONSUMER VICTIMS' OBJECT
Under the GM reorganization plan, a new company would be created to buy the automaker's best assets out of bankruptcy in a deal scheduled to close by August.
The new GM would be 60-percent owned by the U.S. government, 17.5 percent by the United Auto Workers union and 11.7 percent by the governments of Canada and the province of Ontario.
A group representing about 300 Americans with lawsuits against GM for alleged product defects has objected to the reorganization since those injury and wrongful-death claims would have to be paid out from the sale of GM's mostly worthless assets.
The group, which calls itself the Ad Hoc Committee of Consumer Victims of General Motors, said in a bankruptcy court filing earlier this month the automaker's insurance would only cover product liability claims of up to $35 million per claim.
It said that amount would not be sufficient to cover the claims of almost any of the lawsuits since many of the cases involved "devastating injuries" from alleged vehicle defects.
In an attempt to address a separate objection, GM said U.S. officials had changed the terms of the reorganization to make it clear that tooling suppliers and others would still have a claim against the new company for work under way.
GM also said it would try to work out a "consensual" agreement with Toyota to address a joint-venture factory it operates with Toyota in California.
The future of the 26-year-old GM-Toyota joint-venture plant in Fremont, California, commonly known by its acronym NUMMI for the New United Motor Manufacturing Inc, has been uncertain for the past month.
GM is scrapping the Pontiac Vibe it builds there and has not been able to find a new vehicle to produce jointly with Toyota, a senior executive said last week.
Last week, Toyota objected to GM's reorganization plan and asked the bankruptcy court to prevent the company from transferring its 50-percent ownership in the NUMMI joint venture to the newly nationalized automaker.
Toyota said in its filing that GM had not provided any "assurance" about its plans for the joint-venture since filing for bankruptcy.
The plant, which is represented by the United Auto Workers union, also makes the Toyota Corolla sedan and the Toyota Tacoma compact pickup truck.
NEW YORK (Reuters) –
Management consulting firms Towers Perrin Forster & Crosby Inc and Watson Wyatt Worldwide Inc (WW.N) on Sunday announced an agreement to merge into a new publicly-traded company that will expand their global reach.
The deal, valued at about $3.5 billion, will hand Watson Wyatt shareholders 50 percent of shares on a diluted basis in the new firm, called Towers Watson & Co.
Towers Perrin shareholders and some of its employees are entitled to the other 50 percent of shares, though on a restricted basis, the companies said in a statement.
Towers Watson & Co's board will have 12 members with each company designating six, according to a spokesman.
A new location for the combined companies' headquarters has not been finalized, he added. Currently, Watson Wyatt's headquarters are in Arlington, Virginia while Towers Perrin makes its headquarters in Stamford, Connecticut.
Watson Wyatt Chief Executive John Haley will be the new company's CEO, while Towers Perrin CEO Mark Mactas will serve as its president, the statement said.
Annual revenue for the new Towers Watson is seen at more than $3 billion and the company said it expects about $80 million in annual pretax synergies.
"Full realization of synergies" will take three years and cost about $80 million, according to the statement.
Towers Watson will also have significant noncash expenses during the first two years after the transaction is completed, the companies said. The transaction is expected to add to diluted per-share earnings within three years following the consummation of the deal.
The global economic slump has taken a toll on firms that provide human resource and consultancy services, as clients put off projects or cancel certain services seen as non-essential.
Watson Wyatt's CEO earlier said he did not think that an economic recovery "is going to really kick in certainly" before the end of 2009 or early in 2010, and as a result, the company would curb its corporate spending.
NEW YORK (Reuters) –
Bernard Madoff, who became a symbol of greed in the financial crisis for masterminding Wall Street's biggest investment fraud, faces the rest of his life in prison in one of the stiffest punishments for white-collar crime when he is sentenced on Monday.
The courtroom drama will unfold with the swindler hearing angry defrauded investors speak of their financial ruin. As he makes what could be his final appearance in public, Madoff, 71, will read a statement before a judge hands down a decision.
"Mr. Madoff has been very stone-faced throughout the whole process. He doesn't seem to have a lot of remorse," said Anthony Sabino, professor of law and business at St. John's University in New York. "To date, he has refused to implicate anyone else."
More than six months after Madoff's arrest, U.S. prosecutors remain uncertain how much was involved -- such was the complexity of the financial web he wove around the world to operate his Ponzi scheme.
In a Ponzi scheme early investors are paid with money from new clients.
About 1,341 account holders lost about $13 billion in the classic "cash in, cash out" fraud, according to court papers. They also say $170 billion flowed through Madoff's principal account over decades and last November, Madoff claimed accounts held nearly $65 billion, when in fact he had never traded any securities, investigators said.
Madoff, a former nonexecutive chairman of the Nasdaq stock market, pleaded guilty in March to 11 charges, including securities fraud, money laundering and perjury that carry a combined maximum sentence of 150 years. The only other person charged so far is his outside accountant.
LIFE TERM SOUGHT
"It is unlikely that he will come back out," Jayne Barnard, a law professor at the College of William & Mary in Williamsburg, Virginia, said, echoing the view of several legal experts on the likely sentence for an audacious scheme.
U.S. prosecutors argued in court papers on Friday that sentencing Judge Denny Chin should make sure Madoff spends the rest of his life in prison because of the "unique scope and duration" of his crimes.
"Madoff's crimes were the product of a series of decisions made over the course of years, and it was within his power to stop his crimes at any point in time," the government said ahead of the 10 a.m. EDT proceeding in Manhattan federal court.
The arch thief and his wife of 45 years, Ruth Madoff, have been stripped of all their luxury homes and possessions. His wife is being allowed to keep $2.5 million in cash, according to an agreement with prosecutors.
Madoff's lawyer Ira Lee Sorkin asked the judge to impose a sentence of less than life, suggesting a 12-year term or 15 to 20 years as sufficient.
Victims have sent more than 100 letters to the judge, most demanding the maximum punishment allowed. They describe entire savings lost for several generations of families, mortgages unpaid and elderly people unable to pay for medical coverage.
Madoff's wife, two sons and his brother, who have all been the target of swindled investors' vitriol and suspicion, were not expected to attend the hearing. Since his arrest by the FBI in December, the gray-haired Madoff has made all of his court appearances alone, except for his lawyers.
The sentence could be one of the longest handed down in a corporate crime case since a string of scandals this decade.
Among the heftiest punishments were a 25-year term for Former WorldCom Chief Executive Bernard Ebbers and 24 years for former Enron CEO Jeffrey Skilling. Skilling is set to be resentenced next month.
A stock trader of modest origins from the New York City borough of Queens, Madoff built his own firm and used personal connections to orchestrate his investment scheme. His seemingly consistently high returns attracted thousands of customers from all walks of life.
The fraud was missed by U.S. Securities and Exchange Commission regulators and led to calls for tighter oversight.
The SEC had "an investigations system not sufficiently sophisticated or in-depth to uncover the fraud," said George Jackson, an attorney with Bryan Cave LLP in Chicago and a former prosecutor.
"I would suggest that he can provide a wealth of information and more importantly how they missed it."
Jailed next door to the courthouse since his guilty plea, Madoff met for several hours recently with David Kotz, the inspector general of the SEC, but government court papers said it would not be helpful in terms of future regulation.
Kotz is examining the agency's handling of information over the years on Madoff and is due to publish a report in August.
The case is USA v Madoff 09-213 in U.S. District Court for the Southern District of New York (Manhattan)
(Editing by Maureen Bavdek)