GM files for bankruptcy, urges quick action

By Kevin Krolicki and John Crawley

DETROIT/WASHINGTON (Reuters) - General Motors Corp filed for bankruptcy on Monday as the Obama administration took the first steps to try to revive a failed icon of American industry by extending unprecedented federal funding and oversight.

The bankruptcy filing was the third-largest in U.S. history and the largest ever in U.S. manufacturing.

The decision to push GM into a fast-track bankruptcy and provide $30 billion of additional taxpayer funds to restructure the automaker is a huge gamble for the Obama administration.

But in a sign of progress in the government's high-stakes effort, a bankruptcy judge approved the sale of substantially all of U.S. automaker Chrysler's assets to a group led by Italy's Fiat SpA.

In the wake of its widely anticipated bankruptcy filing, GM stock -- once considered a rock-solid blue chip -- was being removed from the Dow Jones industrial average and delisted by the New York Stock Exchange.

"This is proof that GM has failed," said automotive historian Bob Elton. "They have been failing for years but have covered it up. Now they've come to the end of the line."

Chrysler's bankruptcy, also financed by the U.S. Treasury, has been widely seen as a test run for the much bigger and more complex reorganization of GM.

President Barack Obama said on Monday he was confident GM could emerge quickly from bankruptcy, saying the government had been thrust into a reluctant position as controlling shareholder.

"Our goal is to get GM back on its feet, take a hands off approach and get out quickly," Obama said.

The administration's ambitious plan for GM is for a quick sale process that would allow a much smaller company to emerge from court protection in as little as 60-90 days.

In bankruptcy, GM will be divided in two: a leaner "New GM" and "Old GM" -- which will include excess plants and equipment that will eventually be liquidated under court protection.

GM said in a legal filing on Monday that the transaction to create the reorganized company would have to be quick to keep the automaker from losing its best chance to restructure.

"The vicious cycle of frozen credit markets, growing supplier uncertainty and lack of consumer confidence has the potential to unravel the automotive industry and short-circuit the creation of New GM," Chief Executive Fritz Henderson said in a court filing.

On the first day in bankruptcy court, lawyers for GM said they would ask Judge Robert Gerber to approve its proposed sale of its strongest assets in just 30 days.

GM said Judge Gerber granted approval for it to access a new $33.3 billion debtor-in-possession (DIP) financing facility from the U.S. Treasury and the Canadian and Ontario governments.