UPDATE 2-GM prepares to exit bankruptcy on Friday

By Caroline Humer and Kevin Krolicki

NEW YORK/DETROIT, July 9 (Reuters) - General Motors Corp GMGMQ.PK prepared to announce its exit from bankruptcy on Friday after a 40-day reorganization under U.S. government backing that wiped away most of the debt and recurring costs that drove the 100-year-old automaker to crisis.

A court order allowing GM's key assets to be sold to a new company that will be more than 60 percent-owned by the U.S. Treasury took effect on Thursday and the risk of a complicating legal appeal appeared to fade.

The close of the court-approved sale would mark the completion of an unprecedented effort by the Obama administration to save GM and Chrysler from liquidation by slashing debt, labor costs and dealerships.

The White House has also disbursed almost $80 billion to shore up the auto industry, including $5 billion in support for auto parts suppliers.

Chrysler exited bankruptcy a month ago after blazing a precedent-setting trail for GM by following an asset sale plan that gave operational control of the smaller automaker to Italy's Fiat SpA (FIA.MI).

GM Chief Executive Fritz Henderson and Ed Whitacre, a veteran telecommunications executive who will become chairman, were scheduled to appear Friday at the automaker's Detroit headquarters to mark the launch of a new GM.

"The new company can only be good," said Mark LaNeve, GM's sales chief, who was speaking to reporters in Washington.

"I'm very much looking forward to the point where we're operating in the clean air and the name of the company not being associated with bankruptcy," he said.

Bob Lutz, GM's outspoken and high-profile product chief, has also agreed to stay on in a new position, reversing an earlier plan to retire at the end of 2009, a person with direct knowledge of the plan said.

GM Vice Chairman Tom Stephens will remain in charge of GM's product planning, the role he took when Lutz stepped down earlier this year, said the person, who could not be named because the change in plans for Lutz had not been announced.

Meanwhile, a federal judge in New York on Thursday denied a request by a committee of asbestos personal injury claimants to delay the sale of GM pending its appeal.

Judge Lewis Kaplan said in court documents that the stay of the sale would likely lead to the liquidation of GM.

The bankruptcy court overseeing GM's case had previously said the sale of the automaker's key operating assets could go forward after noon Thursday.

The sale will create a "new GM" that will be 60.8 percent-owned by the U.S. Treasury and 11.7 percent-owned by the governments of Canada and Ontario.

A retiree trust fund affiliated with the United Auto Workers union will hold 17.5 percent of the equity.