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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. Canada and Ontario are injecting $9.5 billion for a 12.5% stake.

The U.S. administration's auto task force has gotten 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.

General Motors' finance chief Ray Young said the bankruptcy is a "once in a lifetime" opportunity to stabilize the auto maker's balance sheet.

President Barack Obama is scheduled to speak at 11:55 a.m. EDT.

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 205 points to 8705. GM shares rose 24% to 93 cents, even though they will be delisted from the New York Stock Exchange by Tuesday. 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. Judge Gerber is crucial to determining whether the task force plan to have GM exit protection within 90 days is, in fact, realized. The treatment of bondholders could still see challenges to the plan in court.

The 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 about 70% of the content by value to manufacturers. 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.

For more Dow Jones coverage, please see:

General Motors Files For Bankruptcy 
Bankruptcy Gives GM Opportunity, 'Huge Responsibility' -CFO 
US Judge Approves Chrysler Assets Sale To Fiat 
GM Liquidity Plunges Below $10 Billion -Source 
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 
GMAC Won't File For Bankruptcy, Still Meets Obligations 
White House: Obama To Address Nation On GM Monday Morning 
GM Schedules Press Conference To Follow Pres Obama's Remarks 
'New GM' Products Face Triple Market Challenge 
GM Filing Will Trigger Settlement Of $3 Bln In CDS Deals 
 

(Doug Cameron contributed to this report.)