GM prepares for bankruptcy

By Kevin Krolicki and David Bailey

DETROIT (Reuters) - General Motors Corp GM.N won a cost-cutting deal from its Canadian labour union on Friday, part of a package of concessions the carmaker is expected to take into a federal bankruptcy court by the end of this month in a showdown with its bondholders.

GM's tentative agreement with the Canadian Auto Workers union comes a day after the embattled carmaker won parallel concessions from its major union, the United Auto Workers.

The union deals come as GM nears a resolution in the long-running saga of the sale of its Opel unit.

In Europe, Magna International Inc (MGa.TO) has emerged as a favourite of German officials to acquire Opel, which has received bids from Italy's Fiat SpA (FIA.MI) and Belgian listed-private equity investor RHJ International SA (RHJI.BR)

Deals to cut costs at GM's North American factories and divest its unwanted brands would help clear the way for the carmaker to enter bankruptcy protection with the backing of the Obama administration if an attempt to win over bondholders failed.

GM has kept operating since the start of the year with the help of more than $15 billion (9.4 billion pounds) in emergency federal loans and has said it would need billions of dollars in additional financing if it filed for bankruptcy as expected.

"All of our discussions that we had, it's very likely that they will go into Chapter 11," said CAW President Ken Lewenza at a Toronto news conference to announce the union's tentative contract agreement with GM.

GM bondholders, which hold about $27 billion of the company's debt, have balked at the terms they have been offered, which would give them a 10 percent stake in a restructured company.