July 6 (Bloomberg) -- General Motors Corp. won approval to sell most of its assets to a U.S. Treasury-funded buyer, cementing the Obama administration’s efforts to remake the auto industry and leaving restructuring professionals with several years of work to liquidate the leftovers.

U.S. Bankruptcy Judge Robert Gerber in New York issued his ruling yesterday saying the proposed sale was the only option available to the struggling Detroit-based automaker. He largely followed the ruling of his counterpart on the Manhattan court Arthur Gonzalez, who approved the sale of most of the assets of GM’s smaller rival Chrysler LLC.

“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,” Gerber said in an 87-page opinion. “In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.”

A group of bondholders, tort claimants and unions having their retiree benefits slashed had objected during three days of hearings on the sale, saying the so-called “new GM” to be majority-owned by the U.S. government is just “old GM” stripped of liabilities. The company will sell the same cars and trucks, have the same workers and the same executives.

Government Financing

“This isn’t the Chrysler case. There is no independent buyer,” Barry Bressler, a lawyer for tort claimants, referring to Fiat SpA’s role in the purchase of Chrysler.

The company should take more time and file a traditional bankruptcy reorganization plan on which creditors would get a chance to vote, bondholders said.

Treasury auto task force adviser Harry Wilson testified the company wouldn’t survive a traditional Chapter 11 plan process and the government would pull its $33 billion in financing if Gerber hadn’t approved the sale by July 10.

“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,” Gerber wrote in his opinion.

No Alternatives

None of the objectors has offered any alternative transactions or financing, Harvey Miller, GM’s lawyer from Weil Gotshal & Manges LLP, said during arguments.

“The purchaser makes the decision on what it is willing to purchase,” Miller said. “The only alternative is liquidation.”

Under the terms of the sale, the U.S. government would get 60 percent of the new GM for making $50 billion in bailout loans. A worker fund would get a 17.5 percent stake for giving up health-care benefits, and Canadian government entities would get 11.7 percent for their loans.

Bondholders and unsecured creditors would share 10 percent of the reorganized company’s equity, plus warrants with a total value of $7.4 billion under the proposed plan. New GM’s total equity is anticipated to be worth more than $38 billion.

Wilson testified July 1 he expects an initial public offering of the new GM shares in 2010.

The company plans to leave behind 16 plants and associated real estate in Delaware, Ohio, New York, Indiana, Pennsylvania, Virginia and Michigan, among other discarded property. The Treasury also is leaving the estate with $1.175 billion for a wind-down of the remaining assets. The amount was increased from $950 million when creditors expressed concern they would be stuck with the bill for the liquidation.

Wind-Down Costs

GM Chief Executive Officer Fritz Henderson and Chief Restructuring Officer Albert Koch, who will supervise the liquidation of the remaining assets, both testified during three days of hearings that the wind-down will likely cost as much as $1.25 billion, more than the $950 million set aside.

Without the additional funding from the Treasury, the bankruptcy estate may have needed to sell some of its 10 percent stake in the reorganized company to cover the difference, reducing recoveries for unsecured creditors including bondholders, Koch said.

The “heavy lifting” on winding down the business will be finished in two to three years, while other elements may “drag on” longer than that, Koch said. It will likely be early 2010 before the company is in a position to file a liquidation plan with the court, he said.

The case is In re General Motors Corp., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).