AMR urges court to back restructuring despite antitrust suit

An American Airlines passenger jet glides in under the moon as it lands at LaGuardia airport in New YorkNew York, August 28, 2012.

Credit: Reuters/Eduardo Munoz

By Nick Brown

NEW YORK | Fri Aug 23, 2013 4:43pm EDT

NEW YORK (Reuters) - American Airlines and its creditors' committee on Friday urged a bankruptcy judge to approve the airline's restructuring plan despite an antitrust challenge from the Department of Justice.

In court papers filed in U.S. Bankruptcy Court in Manhattan, American's bankrupt parent, AMR Corp (AAMRQ.PK), said failing to approve the restructuring would add "a destabilizing factor" to its proposal to merge with US Airways Group (LCC.N) and pay back creditors.

AMR's creditors' committee, in a separate filing, said refusal by Judge Sean Lane to give the plan his blessing could threaten creditor support for the plan, which includes AMR's unions and most of its creditors.

"While the DOJ enforcement action has unsettled creditor and stockholder expectations, deferring entry of the confirmation order ... would only exacerbate this uncertainty," the committee said.

The U.S. government also filed a brief on Friday, but did not, as might have been expected, urge Lane to not approve the restructuring plan. Instead the government, through U.S. Attorney Preet Bharara, said it took "no position as to whether" Lane should confirm the plan, but cited the "attendant risk that a confirmed plan may not be able to become effective for a considerable time, if at all."

AMR and US Airways agreed to merge in February in an $11 billion deal that would end AMR's bankruptcy and create the world's largest airline. Experts had expected the deal to enjoy a smooth ride through the regulatory process.

But on August 13, two days before the restructuring plan was to gain final court approval, the DOJ sought to block it, filing a lawsuit in Washington, D.C., alleging a stifling of competition that would harm consumers though higher fares.

Judge Lane, overseeing AMR's bankruptcy in New York, held off confirming the plan in the face of the DOJ's lawsuit, giving the parties until Friday to brief him on the best course of action.

AMR, in its court papers, stressed that the merger agreement, which Lane already approved, contains "a mechanism" to account for this very scenario. If the parties cannot obtain regulatory approval, the deal would eventually be terminated, AMR said.

Lane voiced hesitation to rubber-stamp a deal that might later change due to a settlement with the DOJ. But AMR said future changes to the plan, namely divestitures, are expressly required to go back before Lane for approval.

The creditors' committee said Lane's job is to make sure the plan meets standards under the bankruptcy law. Worrying about antitrust concerns is the DOJ's job.

"They are separate processes, before different courts, and on different schedules," the committee said.

If the Justice Department ultimately succeeds in blocking the merger, it would put AMR's restructuring back at square one, requiring it to forge new strategies for paying back creditors.

AMR shareholders, who stand to receive a 3.5 percent stake in the new entity under the merger, would likely be wiped out under any plan that excludes a merger, restructuring experts have said.

AMR's unions also support a merger. The Transport Workers Union, representing ground crew members, on Thursday filed court papers urging Lane to approve the deal.

But not everyone is in favor of Lane signing off. A group of plaintiffs in a separate antitrust lawsuit against US Airways filed a brief on Thursday in AMR's bankruptcy, saying the judge cannot under bankruptcy law confirm a plan that may prove not to be feasible. AMR appears "unable to articulate a ‘Plan B' which would resolve" antitrust risks, the group said in its filing.

Regardless of Lane's decision, the issue will come down to the sides' ability to resolve matters with the DOJ. Chapter 11 merger plans require both bankruptcy court approval and regulatory approval, and one does not impact the other.

At a hearing last week, Lane did not seem opposed to the restructuring plan on its face, his hesitation instead rooted in concerns that the deal he was being asked to approve might look different a few months down the road.

The DOJ antitrust suit will take months to resolve, and possibly longer if it goes to trial.

(Reporting by Nick Brown; Editing by Tim Dobbyn)

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Toyota top-selling automaker despite China slump

TOKYO (AP) — Toyota shrugged off China sales woes to stay the world's top selling automaker for the first half of this year, outpacing U.S. rival General Motors Co., which boasted such bragging rights for seven decades until 2008.

Toyota Motor Corp. sold 4.91 million cars and trucks around the world for the January-June period, down 1.2 percent from the previous year, according to numbers it released Friday.

GM said earlier this month it sold 4.85 million vehicles worldwide in the six months, growing almost 4 percent as it gained U.S. sales faster than Toyota. For the second quarter alone, GM had a slight edge, outselling Toyota by about 10,000 vehicles.

GM was the top-selling automaker for seven decades before losing that title to the Japanese automaker in 2008. GM retook the spot in 2011, when Toyota's plants were slowed by an earthquake and tsunami in northeastern Japan that wiped out parts suppliers.

Toyota has since recovered and was at the top again last year even as sales in China were hurt by anti-Japanese sentiment that flared over a territorial dispute, setting off boycotts and riots. The deep sales slump that started in the second half of last year has waned in the past few months and Japanese automakers might be poised to start growing again in China.

Toyota stayed ahead of GM in the first half of 2013 because of solid sales in other regions. The maker of the Prius hybrid and Camry sedan also did better than expected in Japan, where the auto market has been stagnant for years.

Volkswagen AG of Germany, which includes in its group Audi, Porsche and other brands, trailed Toyota and GM in the global race, selling 4.7 million vehicles during the first half of this year.

Yet it is posting strong growth in countries such as China, offsetting a bleak European market, and it is also determined to become No. 1.

One key difference between Toyota and the two other automakers is that it manufactures heavy trucks. GM and Volkswagen have light trucks but no heavy trucks in their lineup.

Excluding sales of 78,000 trucks for Toyota's Hino Motors, Toyota's global vehicle sales totaled about 4.83 million for the first half, according to Toyota.

Toyota President Akio Toyoda said sales were not the only measure of excellence, and profitability, quality of workers and productivity were also significant.

"What truly defines being No. 1 is an eternal pursuit for which there is never an answer," he told reporters this week.

GM officials also say they don't care who wins the global sales race. But the numbers tend to reflect company momentum, and the outcome is good for morale not only for employees but the wide range of industries that auto manufacturing supports in each nation.

Yasuaki Iwamoto, auto analyst at Okasan Securities Co. in Tokyo, believes Toyota's popularity in Southeast Asia will continue to boost vehicle sales numbers in coming months. And that is a key plus for a manufacturer.

"The merit of scale is not just about numbers and is likely to lead to cost cuts," he said in a report.

At a recent opening of a Toyota training facility, Keiji Furuya, a lawmaker and government minister, told the crowd he was proud of Toyota's achievements.

"Toyota is the No. 1 automaker in the world. And it is important it stays the No. 1 automaker in the world," he said.

Tatsuo Yoshida, auto analyst at Mitsubishi UFJ Morgan Stanley Securities Co., expects Toyota, GM and Volkswagen to be switching places at the top in coming years as all three can count on growth in different global markets.

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Follow Yuri Kageyama on Twitter at www.twitter.com/yurikageyama

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