General Motors, the fallen giant of the American auto industry, is expected to file for bankruptcy protection on Monday and put its fate in the hands of President Obama and the nation’s taxpayers.
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President Obama is scheduled to announce his support of G.M’s bankruptcy filing in a televised speech late Monday morning at the White House, according to people with knowledge of the automaker’s plans, much as he did on April 30 when G.M.’s cross-town rival, Chrysler, sought court protection.
G.M., which has been subsisting on federal loans since January, is expected to file for reorganization in Federal Bankruptcy Court in Manhattan, and immediately begin to restructure its troubled operations under government control. G.M. executives plan a news conference shortly after Mr. Obama’s speech.
The filing would be a stunning climax to G.M.’s financial collapse, triggered last year when auto sales plunged and the automaker appealed to Washington for emergency aid.
While G.M. has already received $19.4 billion in federal loans, the government will probably spend another $30 billion or more to pay for the reorganization.
Mr. Obama and his advisers expect G.M. to emerge from court protection in a few months as a new, radically smaller company owned by the federal government, the United Automobile Workers union and its bondholders.
But the road to recovery will be a long and arduous for the 100-year-old automaker that has towered over the American economy since the 1950s and for decades built and sold more cars than any company in the world.
“For all the talk about a new beginning, there is no denying that the collapse of this once great company is a national tragedy,” said John Casesa, an industry consultant and former Wall Street analyst. “Fortunately, the government has been decisive and remarkably quick in salvaging what’s worth saving.”
The last obstacle to an orderly bankruptcy was removed Saturday when a majority of investors holding $27.2 billion in G.M. bonds agreed to exchange their debt for stock and not fight the filing in court.
A G.M. bankruptcy has been widely anticipated since Mr. Obama and his auto task force forced Chrysler, G.M.’s smaller Detroit rival, to file for Chapter 11 last month.
Administration officials have described Chrysler’s bankruptcy as a test case for the more complex task of restructuring G.M, a far larger company that last year lost $30.9 billion.
A federal judge is expected to rule on the sale of most of Chrysler to Fiat, the Italian carmaker, sometime on Monday or Tuesday. The judge, Arthur J. Gonzalez, heard arguments and testimony on the proposal during three days of marathon hearings last week.
If approved, Chrysler and the government expect to close on the Fiat deal within days of receiving permission. But the sale is being challenged by several parties, including three Indiana state funds and several groups of dealers that have been designated for removal from Chrysler’s network.
G.M. essentially came under government control when it received its first federal loans from the Bush administration in late December and, in return, agreed to cut labor costs, reduce its debt and drastically downsize.
Since taking office, Mr. Obama and his advisers have pushed G.M. to cut deeper into its global work force of 160,000, drop underperforming brands and models, and shrink its network of factories and dealers to match its shrinking market share.
Mr. Obama rejected G.M.’s initial plans for restructuring, and forced its chief executive, Rick Wagoner, to resign as a condition for more government aid.
Two of the president’s advisers, Steven Rattner and Ron Bloom, also took over negotiations with the bondholders and unions in an effort to reduce G.M.’s debt load.
Earlier this month, the U.A.W. agreed to take 17.5 percent of G.M.’s stock to finance half of an estimated $20 billion in future health-care obligations for hundreds of thousands of retirees.
After soundly rejecting an initial offer to swap their debt for equity, about 54 percent of G.M. bondholders agreed on Saturday to a deal that could eventually give them 25 percent of the automaker.
But the primary owner will be the federal government, which will convert most of its outstanding loans to G.M. into a 72.5 percent ownership stake.
The government also plans to name Albert A. Koch, a managing partner at the advisory firm AlixPartners, as the chief restructuring officer, according to people briefed on the situation. Mr. Koch will report to G.M.’s chief executive, Fritz Henderson, as well as to the G.M. board. Associates of AlixPartners have been working for weeks, drafting a turnaround plan.
The government did not name a restructuring officer at Chrysler, which sought bankruptcy protection in April, namely because of plans to sell assets of Chrysler to the Italian automaker Fiat. But G.M. does not have a partner waiting, and the government wants to make sure that an outsider who did not come up through the G.M. system is on hand to help lead the restructuring, people who had been briefed on the matter said.
In G.M.’s case, business experts said that the company could remain under federal supervision for years, even if it manages to emerge from bankruptcy on an accelerated timetable.
“It’s going to mean a new chapter in the history books on American capitalism,” said Michael Useem, a professor of management at the Wharton School at the University of Pennsylvania. “This is truly without precedent in scope and scale.”
Mr. Obama and his auto advisers have said that the nation can not afford to let G.M. go bankrupt on its own and put millions of jobs at risk in the tightly integrated auto industry, where car companies share many of the same parts suppliers.
However, the bankruptcy filing will set in motion a painful overhaul of its struggling operations. G.M. has said it will cut 21,000 factory jobs in the United States by next year, and close more than a dozen plants. The company has also pledged to eliminate 40 percent of its 6,000 dealers and drop four of its brands.
As part of its restructuring, G.M. is also expected to identify 14 assembly and parts plants that it expects to close, as it reorganizes its manufacturing operations to concentrate more on smaller vehicles.
In the industrial Midwest, where G.M. has its biggest presence, the bankruptcy filing is likely to fuel more unemployment in a region already hit hard by the recession.
“It’s the auto apocalypse now, not just for Michigan, not just for manufacturing, but for America,” said Representative Thaddeus McCotter, Republican of Michigan.
G.M. is already a shadow of the automotive colossus it once was. Its American market share has slid from a high of 50 percent in the 1960s, to about 20 percent today. Its union work force has dwindled to about 60,000 from a high of 395,000.
The company has been losing money since 2005, but bottomed out last year when a weak economy and tight credit conditions caused new vehicle sales to drop to their lowest levels in 25 years.
Last November, the top executives at G.M., Chrysler and the Ford Motor Company appealed for financial help from Congress and the Bush administration. Ford ultimately declined to take government loans because it still had a line of credit to draw upon with its banks.
But both G.M. and Chrysler would have run out of money without government intervention, and possibly been forced to liquidate.
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