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GM Asbestos Claimants Seek Formal Panel, Saying Deal Omits Them

By Jeff St.Onge

June 8 (Bloomberg) -- Asbestos-injury claimants asked for an official committee in General Motors Corp.’s bankruptcy case, saying the government-backed plan to sell the automaker may be unconstitutional since they’ve been left out of negotiations.

The authority to approve GM’s plan to sell its best assets to a new company would be limited if future asbestos claimants don’t participate, lawyers for people suing over their injuries said in a filing yesterday in U.S. Bankruptcy Court in New York.

“Due process concerns limit the court’s ability to enter an order affecting the rights of unknown future claimants absent appointment of a legal representative to protect their interests,” the filing said. “They cannot be bound by a reorganization of which they are unaware and in which they do not participate.”

The spinoff of Chrysler LLC’s core business to a new company initially owned 20 percent by Fiat SpA is being fought by a group of creditors including asbestos claimants. GM’s liability for asbestos-related legal claims was $648 million in 2008 and $637 million in 2007, the Detroit-based company has said in regulatory filings.

“The magnitude of General Motors’ projected ongoing asbestos liability has been a matter of public knowledge and should have been addressed by both General Motors and the Auto Task Force in their restructuring activities,” lawyers for the asbestos-injury claimants said in the filing.

Karin Kirchner, a spokeswoman for GM Europe, declined to immediately comment.

The U.S. Trustee, the Justice Department arm that oversees bankruptcy, appointed an official committee of GM’s unsecured creditors last week that included two people suing GM for asbestos exposure and product liability, lawyers said.

The automaker sought Chapter 11 protection in on June 1 after failing to reorganize out of court. Under U.S. bankruptcy law, companies with asbestos-related liabilities can channel legal claims into a trust. Lawyers’ bills and other costs of official committees in bankruptcy cases are typically paid by the company.

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

To contact the reporter on this story: Jeff St.Onge in London at jstonge@bloomberg.net.

Last Updated: June 8, 2009 04:46 EDT

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