General Motors (GM) has reached another milestone in its reinvention after a US bankruptcy court approved the sale of its “good” assets, resulting in the transfer of its famous Chevrolet, Cadillac and Buick brands to a new, government-owned company.

Judge Robert Gerber, of the US Bankruptcy Court for the Southern District of New York, issued his approval for the sale late on Sunday, stating that the only alternative to GM’s plans would be liquidation.

This, he said, would be “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. In the event of a liquidation, creditors now trying to increase their incremental recoveries would get nothing.”

The US Government had set a deadline of July 10 for the sale to be approved. Giving objectors only four days to appeal against the sale, the judge said that a lengthy bankruptcy would be “so injurious to GM as to not allow for GM’s viability going forward”.

Nevertheless, appeals appear likely. One sticking point for consumer groups is that the “new GM” would be free of any liability for pending lawsuits from car-accident victims arising from incidents that occurred before the company’s bankruptcy protection.

Under the terms of the deal, which will mark a victory for the Obama Administration if it proceeds, the US Government will take a 60.8 per cent stake in the new GM, having provided the company with more than $50 billion (£30 billion). The Canadian Government will hold about 11.7 per cent, a healthcare trust for the United Auto Workers union will get a 17.5 per cent stake and bondholders and other unsecured creditors will get 10 per cent.

GM’s unprofitable divisions will be liquidated and the Government hopes to take the new GM public next year.

Fritz Henderson, the carmaker’s chief executive, said: “The new GM will have a dramatically stronger balance sheet, with far less debt, which will allow us to better invest in our business and our future.”

Magna, the Canadian car parts maker, remains the most likely bidder for GM Europe, which includes Vauxhall in Britain. However, GM emphasised yesterday that it was still in talks with other potential buyers — Beijing Automotive Industry Corporation and RHJ International, a Brussels-based holding company.

At a meeting with representatives from the British Unite union last week, Magna outlined its vision for the future of GM Europe, but the details remain confidential. Unite representatives are due to meet Magna again in Germany on Thursday.

In return for a commitment to save jobs, it is believed that Magna wants up to £350 million of UK government funding. Last week Lord Mandelson, the Business Secretary, said that the Government would be prepared to underwrite a deal, although he would not commit to a specific amount until Magna had presented a business plan for Vauxhall.

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