The US treasury is preparing to force General Motors into a carefully-prepared, fast-track bankruptcy that will split the automaker into 'good' and 'bad' companies by 1 June, a US newspaper said on Monday (14 April).

The New York Times report, citing "people with knowledge of the plans", said groundwork was being laid for a bankruptcy filing despite GM's public contention that it could still reorganise outside court.

Much of the report confirmed or substantiated numerous other media reports in the last two weeks since the treasury's auto task force demanded the resignation of former GM president and CEO Rick Wagoner, who reportedly was willing to consider bankruptcy only in his final days on the job.

GM has already received $13.4bn in US federal government bailout loan aid and won't get any more help until its bondholders agree to convert $28bn in debt into equity in GM. It also must wring further concessions from the key United Automobile Workers (UAW) union, which won't oblige without bondholder sacrifices.

The New York Times said task force members spent last week in meetings and on conference calls with GM officials and advisers in Detroit and Washington with more talks expected this week. The goal: to prepare for a fast "surgical" bankruptcy. GM reportedly has insisted a quick restructuring is necessary so its image and sales are not damaged permanently.

The paper added, as has been widely reported earlier, that the preparations are being made to ensure GM is ready to file for bankruptcy should it not agree a equity for debt swap with the bondholders or concessions from the UAW.

The sources added that president Obama, elected last year with strong backing from labour, remained concerned about potential risk to GM's pension plan and wanted to avoid harming workers.

The paper said, also as had been reported earlier elsewhere, that one possible plan would create a new company that would buy the 'good' assets of GM almost immediately after it files for bankruptcy leaving the less desirable assets, including unwanted brands, factories and health care obligations in the old company, which could be liquidated over several years.

Treasury officials reportedly are planning to out the 'good GM' in and out of bankruptcy protection in as little as two weeks, using $5-7bn in federal financing.

Legal experts and federal officials told the New York Times the rest of GM - which a recent report said could be relegated by Volkswagen to only the world's third largest automaker this year - may require as much as $70bn in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories.

Since taking over on 31 March, the automaker's new chief executive, Fritz Henderson, has increasingly hinted that bankruptcy is probable unless agreements were reached with labour and the bondholders by the 1 June deadline set by Obama's administration.

The paper said Henderson has assigned staff to work with legal and government advisers on such a possibility, although he has not agreed a bankruptcy is inevitable.

He said last week GM hoped to restructure out of court, but was also preparing for a filing.

"If we need to resort to bankruptcy, we have to do it quickly," he said in an interview with the Canadian Broadcasting Corporation.

GM's eventual fate would also affect Delphi, the key GM supplier (and former parts unit) which has been in bankruptcy for three years.

Should Delphi fail to reach an agreement with GM and the administration, it could be forced to liquidate, a source told the New York Times. That could lead to the US government and GM acquiring some parts of Delphi out of the liquidation.

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