GM trundles toward bankruptcy but questions remain

By Nick Carey and Kevin Krolicki

DETROIT (Reuters) - General Motors Corp and the U.S. government finalized plans on Sunday for the battered company to reorganize, setting the stage for America's largest-ever industrial bankruptcy and heralding a new and uncertain era for the No. 1 U.S. automaker.

GM will file for Chapter 11 bankruptcy protection on Monday at the U.S. Bankruptcy Court in the Southern District of New York before markets open, according to sources with direct knowledge of the preparations.

Al Koch, a managing director at advisory firm AlixPartners LLP, will be appointed Chief Restructuring Officer at GM, a source familiar with the matter said.

U.S. President Barack Obama is expected to outline GM's next steps on Monday as the federal government prepares to take a more than 70 percent stake in the company in exchange for $60 billion (37 billion pounds) in financing. Nearly half of that money has already been extended this year in emergency aid.

The government's of Canada and Ontario will take an equity or debt position in a restructured GM, but details are still being worked out.

But even as the 100-year-old firm cleared a major hurdle to a smooth passage through bankruptcy with approval of a debt-for-equity exchange, questions remained about the ability of the company to return to viability.

And U.S. auto sales for May are expected to offer little hope for a short-term recovery for the industry.

No. 3 U.S. automaker Chrysler LLC is nearing the end of a court-supervised restructuring in New York to cut debt and non-performing assets, as well as consummate an alliance with Italy's Fiat SpA.