Plan to sell GM in the hands of federal judge

US Judge Robert Gerber asked GM’s lawyers to submit a proposed order that would be entered if the sale were to be approved. They said they would do so by tonight or tomorrow. Gerber is expected to rule after that.

A lawyer for GM warned the court that the only alternative to GM’s plan would be a liquidation of the company’s assets that would have “horrific’’ consequences for everyone involved.

Lawyer Harvey Miller said the government is committed to cutting off funding to GM if the sale is not approved by July 10. That followed testimony Wednesday from a member of President Obama’s automotive task force who indicated the government has no plans to continue funding GM past next Friday if the sale is not approved by then.

GM’s government-backed plan for a quick exit from Chapter 11 protection hinges on the sale of most of its assets to a new entity, allowing the automaker to leave behind many of the costs and liabilities that have made it unprofitable. The Detroit carmaker’s June 1 filing for bankruptcy protection was the fourth-largest in US history.

Some parties objecting to the sale argued in court that the Obama administration will not allow GM to fail.

“Essentially the objectors are asking you to play Russian roulette,’’ Miller told Gerber, adding that ignoring the deadline puts the futures of GM’s employees, retirees, and creditors at risk.

Harry Wilson, the task force member who testified Wednesday, said a quick sale is needed because the government cannot keep sinking billions in tax dollars into the company for an open-ended period with no guarantee of success.

Yesterday, Michael Richman, a lawyer for a trio of bondholders opposed to GM’s plan, told Gerber to “call the government’s bluff’’ and require GM to restructure itself under Chapter 11 instead of approving the quick sale of its assets. This would allow the bondholders to negotiate for more in exchange for the debt they hold, he said.

Richman said that while the company might be powerless to fight the government’s demands, the court can “push back’’ to protect the interests of the company’s stakeholders. The trio of bondholders Richman represents hold just a fraction of GM’s unsecured debt. One of the members bought his bonds for just 2 cents on the dollar, while the other two spent no more than 20 cents on the dollar for theirs.

As part of the sale plan reached with the auto task force, the US government would get a 60 percent stake in the new company in exchange for what’s expected to eventually total nearly $50 billion in aid.

The Canadian government, which has also contributed billions in aid, would get a 12.5 percent stake while the United Auto Workers union would take a 17.5 percent share to fund its health care obligations. Unsecured bondholders get 10 percent.

Existing GM shareholders are expected to be wiped out.

The remaining pieces of the company, including some closed plants, would become the “Old GM’’ and be liquidated.

GM hopes to emerge as a leaner company, less burdened by debt and labor costs.