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THE NEWS: General Motors Corp. (GM) filed for Chapter 11 bankruptcy protection in the southern district of New York 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.

Judge Robert Gerber was named to preside over the largest-ever U.S. industrial bankruptcy filing, case number 09-50026 in the Manhattan court.

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 about the filing and the auto industry in an address at 11:55 a.m., followed by a separate presentation by GM chief executive Fritz Henderson.

Canada and Ontario, which are injecting $9.5 billion for a 12% stake, have a briefing scheduled for 10:45 a.m. EST.

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.

WHAT HAPPENS NEXT: The key question now 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.

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 
GM-Owned Dealership Files For Chapter 11 Bankruptcy 
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 
WSJ(6/1) GM Fallout To Reach Consumers 
WSJ(6/1) Potential Conflicts Abound In Government's GM Role 
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-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com