AT A GLANCE: GM Files For Bankruptcy; Chrysler Deal Approved

THE NEWS: General Motors Corp. (GM) filed for Chapter 11 bankruptcy protection in New York on Monday. The pre-packaged plan leaves the federal government in control of a downsized auto maker, faced with the weakest market conditions in a generation.

Meanwhile, a revamped Chrysler is poised to exit bankruptcy reorganization as early as Monday after a U.S. judge approved the $2 billion sale of the bulk of its assets to a group led by Fiat SpA (FIATY).

THE DETAILS: Judge Robert Gerber was named to preside over the GM bankruptcy, the largest-ever U.S. industrial bankruptcy filing.

The Obama administration on Sunday said the government would provide an additional $30 billion in financing to GM in return for 60% equity in the new company and $8.8 billion in debt and preferred stock.

President Barack Obama is scheduled to speak at 11:55 a.m. EDT, followed by a separate presentation by GM Chief Executive Fritz Henderson.

Canada and Ontario, which are injecting $9.5 billion for a 12.5% stake, have a briefing scheduled for 10:45 a.m. EDT.

The U.S. administration's auto task force has already strong-armed provisional backing from a majority of bondholders and unions representing workers in the U.S. and Canada, moves likely to ease its passage through court.

The task force will also install restructuring expert Al Koch and a team from AlixPartners LLP to work alongside GM CEO Fritz Henderson, while the majority of the company's board will also be replaced.

Chrysler Group LLC will be controlled by the U.S. and Canadian governments, a union-run trust fund, and a group let by Fiat. Obama said the approval of the Chrysler-Fiat combination will save thousands of jobs.

MARKET REACTION: U.S. stocks gained despite GM's bankruptcy filing, with the Dow Jones Industrial Average rising 192 points to 8692. GM shares fell 8% to 68 cents. General Motor's benchmark 2033 bonds doubled. The bonds are now trading at 14 cents, according to MFGlobal's Andrew Brenner. That's against 7 cents at the end of last week. U.S. Treasury prices were lower.

WHAT HAPPENS NEXT: The key question now for GM is: Will it work?

The bankruptcy filing by the world's second-largest auto maker will have repercussions across the global auto sector and reverberate in broader financial markets. Judge Gerber is viewed as crucial in determining whether the task force plan to have GM exit protection within about 90 days is, in fact, realized. While many elements have been "pre-packaged," the treatment of bondholders could still see challenges to the plan in court, especially from the large retail base. Unsecured creditors are slated to receive 10% of the common equity in the new GM, versus 17.5% for the health fund run by the United Auto Workers union, with the balance held by the government.

The most crucial question for GM is how it plans to accelerate the operational turnaround and revise the planning forecasts rejected by the task force at the end of March. The operational plans will have a knock-on effect for the distressed auto supplier sector, which supplies around 70% of the content by value to manufacturers. The slide in global vehicle sales, most notably in the U.S., has left many in, or on the brink of, bankruptcy, or already under court protection. The government on Sunday reiterated it plans to support auto suppliers. GM said it will keep plants running through the bankruptcy, but said Monday that it will shutter 14 factories and three parts centers by the end of 2011.

Other issues include the fate of GM's pension obligations and the role of the Pension Benefit Guaranty Corp.; the relationship of GM and its European operations following a tentative deal to sell a majority stake to a consortium led by parts maker Magna International Inc. (MGA); treatment of creditors to Delphi Corp., GM's former parts unit; and the cost of culling its dealer network and the higher number of employee buyouts outlined last week.

THE MARKETPLACE: U.S. light vehicle sales are expected to fall to around 10 million this year from 13.1 million in 2008 and 16.1 million in 2006. With GM and Chrysler both cutting back production further, rivals are stepping up output to take advantage of negative customer perceptions of bankrupt auto makers. U.S. auto production is expected to be higher in the second half of the year, reversing its usual historical pattern. May auto sales data is released June 2.

For more Dow Jones coverage, please see:

General Motors Files For Bankruptcy 
US Judge Approves Chrysler Assets Sale To Fiat 
GM-Owned Dealership Files For Chapter 11 Bankruptcy 
GM: 14 Plants, 3 Parts Centers To Close By 2011 
Judge In Adelphia Bankruptcy Gets GM Chapter 11 Case 
US Role In GM Bankruptcy Raises Foreign Auto Concerns 
White House: Obama To Address Nation On GM Monday Morning 
GM Schedules Press Conference To Follow Pres Obama's Remarks 
WSJ(6/1) Remnants Of 'Old GM' To Linger 
'New GM' Products Face Triple Market Challenge 
GM Filing Will Trigger Settlement Of $3 Bln In CDS Deals 
 

(Doug Cameron contributed to this report.)