Detroit/Washington - General Motors Corp will file for bankruptcy on Monday, US officials said, forcing the 100-year-old carmaker once seen as a symbol of American economic might and dynamism into a new and uncertain era of government ownership.
The planned filing, confirmed by Obama administration officials, would be the third-largest in US history and the largest-ever US manufacturing bankruptcy.
The decision to push GM into a fast-track bankruptcy, and provide $30 billion of additional taxpayer funds to restructure the company so it can better compete with lower-cost Asian automakers, is a huge gamble for the Obama presidency.
But the administration saw few other options at a time when the jobless rate is soaring, given that GM employs 92 000 in the United States and is indirectly responsible for 500 000 retirees.
The filing in a federal court in Manhattan is expected before US markets open and caps a three-decade-long decline for the Detroit automaker that ended in outright crisis after the weak global economy, high oil prices and tight credit slammed sales and left it unable to raise cash.
"Now the hard part begins, which is making GM and Chrysler competitive. If they don't do that, then we'll be doing this all over again in a few years," said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo.
"The immediate implication is that the companies are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share."
Since the start of the year, GM has been kept alive with US government funding as a White House-appointed task force vetted plans for a sweeping reorganisation that will be undertaken with $50 billion in government financing.
By preparing to take a 60% stake in a reorganised GM, the Obama administration is gambling that the automaker can compete with the likes of Toyota Motor Corp after its debt is cut by half and its labour costs are slashed under a new contract with the United Auto Workers (UAW) union.
The governments of Canada and Ontario agreed to provide another $9.5 billion to GM in a late addition to the plans for the bankruptcy that have been taking shape for weeks, senior US officials said.
The plan as detailed by US officials is for a quick sale process in bankruptcy court that would allow a much smaller GM to emerge from court protection in as little as 60 to 90 days.
GM plans to close 11 US facilities and idle another three plants. It has not provided an update target for job cuts but had been looking to cut 21 000 factory jobs from the 54 000 UAW workers it now employs in the United States.
The UAW would have a 17.5% stake in the "new GM." The Canadian government would own 12% stake and GM bondholders would get 10%.
Officials involved in the planning for GM said the White House was a "reluctant investor" in GM but had to prevent a liquidation that analysts say would have cost tens of thousands of jobs at a time when the economy is mired in recession.
Analysts said while there were high risks to the Obama administration's approach, it had succeeded in pulling GM back from the brink of collapse.
"I think they have a much greater chance of emerging as a healthy company now than they did just six months ago," said Aaron Bragman, an analyst at IHS Global Insight. "Nobody gave them any possibility of emerging as a whole company."
President Barack Obama is due to speak on the carindustry and the GM situation shortly before noon Eastern time on Monday. A news conference by GM chief executive Fritz Henderson will follow.
US officials said there was no plan to provide any further funding for GM and insisted that the US industry could support all of the Detroit Three.
The administration said the goal of the restructuring was to help GM be profitable in a year when the industry sells 10 million vehicles, versus the 16 million it sold in 2007.
The task force is led by Wall Street investment banker Steven Rattner and labour negotiator Ron Bloom, and includes top White House adviser Lawrence Summers and US Treasury Secretary Timothy Geithner.
A federal judge could approve the sale of Chrysler's best assets to a new company led by Fiat SpA as soon Monday. Ford Motor Co has not sought any emergency federal aid.
"We do believe, and completely endemic in the president's decision, was a belief that this country can support three domestic successful viable auto companies," a senior Obama administration official said.
Even if GM and Chrysler emerge swiftly from bankruptcy this summer, the autos task force will stay in business - shifting to an investment manager role.
Senior administration officials said on Sunday there was plenty to keep the task force staff busy, monitoring the government's stake of about 60% of GM, and less than a 10% stake in Chrysler.
Carefully orchestrated failure
GM's bankruptcy is the most carefully orchestrated Chapter 11 filing in the history of American business.
The carmaker's final descent started with president George W. Bush administration's emergency aid announcement on Dec. 19 and accelerated in late March when the Obama government gave it 60 days to restructure.
While the "new GM" is expected to emerge quickly from court protection, the carmaker's shuttered plants, stranded equipment and other spurned assets would be left to liquidation in bankruptcy.
Al Koch, a managing director at advisory firm AlixPartners LLP, will be appointed chief restructuring officer in charge of liquidating those GM assets.
A veteran restructuring adviser, Koch has had prominent roles in Kmart Corp's restructuring and other turnarounds.
Over the weekend, GM won support from investors representing 54% of its $27 billion in bondholder debt offered their support for the US government's plans.
Bondholders could take up to 25% of GM if it recovers to be worth what it was in 2004, before it began round after round of cost-cutting in what proved to be a failed bid to make up for lost sales.
The bondholders' support does not ensure court approval but gives the company an important symbolic victory that bankruptcy experts and analysts say will help GM's case.
Obama said in an interview with NBC aired over the weekend that the government was forced to take over GM in order to prevent a collapse that could have brought down other companies and further batter the recession-hit US economy.
"My preference would have been to stay out of it completely," Obama said.
In the past week, GM has also concluded an amended agreement with the United Auto Workers union under which the UAW will receive a 17.5 percent in a restructured company and other debt and preferred stock instead of $20 billion in cash.
The UAW also made concessions last week that some say mark a fresh blow to the once common, well-paid manufacturing jobs that created America's middle class.
Founded in 1908, GM rose to dominate the US and global car industries under the stewardship of pioneering chief executive Alfred Sloan, who famously pledged the carmaker would deliver "a car for every purse and purpose."
By the mid-1950s, at the peak of its success, GM had some 514 000 employees. It accounted for about half of US new car production and its sales were twice as large as the No. 2 corporation, Standard Oil.
GM's stock fell to 75 cents on Friday, a level last seen during the Great Depression on what was expected to be its last trading day before bankruptcy.