GM bankruptcy seen as all but inevitable

By Soyoung Kim and David Bailey

DETROIT (Reuters) - After 100 years in business and 10 months of frenzied but failed restructuring, General Motors Corp GM.N is weeks from the bankruptcy filing experts say will be required to complete the Obama administration's bid to reshape a fallen icon of American industry.

Facing a government-imposed June 1 deadline to restructure, GM is scrambling to slash some $27 billion (17.6 billion pounds) of bond debt, win sweeping cost concessions from the United Auto Workers union and eliminate almost 1,600 U.S. dealers.

But with the clock ticking, experts see it as all but certain GM will follow its smaller rival Chrysler into federal bankruptcy court.

"I almost think it is inevitable," independent auto industry analyst Erich Merkle said. "I don't know how they are going to escape it."

The battery of problems to have hit GM range from plunging sales and declining share to a line-up that has seen more misses than hits over the past decade and that trails engineering leaders like Toyota Motor Corp (7203.T) and Honda Motor Co (7267.T) in hybrid technology.

But GM's debt-laden balance sheet is the source of its immediate crisis and the reason restructuring experts, analysts and auto executives do not see a way forward that avoids what could be a complicated and contentious bankruptcy.

"The only way it is not inevitable is if the government accepts whatever percentage of bondholders have tried to exchange, whether it is 40 percent or 50 percent or 60 percent," said Peter Kaufman, president and head of restructuring and distressed mergers and acquisitions at the Gordian Group LLC in New York.

GM has said that it must have 90 percent of the $27 billion of bonds participate in the exchange or it will be forced to file for bankruptcy.