Storied carmaker General Motors (GM) filed for bankruptcy on Monday, becoming the largest-ever US manufacturer to enter the court process and marking the latest dark chapter for a struggling US auto industry.
The carmaker goes into an uncertain bankruptcy with the backing of the US government, its chief labour union and the majority of its creditors. But many smaller investors feel they are getting a poor deal and have promised to fight GM's reorganisation plans in court.
President Barack Obama and GM chief executive Fritz Henderson were to lay out the company's path out of bankruptcy later in the day.
GM filed the papers electronically in the Southern District of New York's bankruptcy court, setting the stage for an unprecedented government takeover of the largest US auto manufacturer in exchange for billions of dollars more in emergency funds.
That same court on Monday paved the way for GM's smaller rival Chrysler to exit the court process, just one month after it sought the court's protection.
In a major step, the New York court approved the sale of Chrysler's best assets into a new company controlled by Italian maker Fiat. The White House has said Chrysler's experience should give GM some hope for its own journey.
"Only a month ago, (Chrysler's) very future was in doubt," Obama said in a statement. "Now, as a result of a substantial commitment by the US government, and tough sacrifices from all stakeholders involved, Chrysler has a new lease of life."
The Obama administration is convinced GM can exit the court process within two-three months as a smaller, largely debt-free company, according to senior officials who briefed on the plans Sunday night.
The White House in a statement said Monday would be another "historic day" for the century-old manufacturer that marks "the end of an old General Motors, and the beginning of a new one".
Struck by a deep US recession that has nearly halved its car sales, GM was left no other option as a government-imposed deadline to prove its viability was to expire Monday.
GM intends to use the courts to settle about $27 billion in debt owed to creditors and sell its best assets into a new company, leaving behind iconic brands Pontiac, Saturn and Hummer.
The company will also cut ties with one-fifth of its North American dealerships and eliminate more than 30,000 jobs.
Its European operations - Vauxhall and Opel - are in the process of being sold off to Canadian-Austrian auto-parts manufacturer Magna, with the aid of the German government.
The so-called "new" GM will still be effectively nationalised until the company can survive without the government's help.
The White House will help replace a majority of the company's board of directors, though senior administration officials insisted they had no interest in running GM's "day-to-day operations".
The Obama administration will control about 60 per cent of the company in return for another $30 billion in emergency cash. That is on top of $20 billion plugged into the struggling firm since December.
Canada's government will contribute another $10 billion and take a 12-per cent stake.
Thomas Donohue, president of the US Chamber of Commerce, said he would be watching just how much the US and Canadian governments exercise control over GM's future decisions.
"Our biggest concern with the restructuring plan ... is the potential for governments and unions to influence production, product, workforce, and management decisions in ways that could jeopardise the automakers' chances for survival," Donohue said.
GM said on Sunday that about 54 per cent of its bondholders have already backed the plan, after the US Treasury Department offered the group a sweetened deal. The creditors will start with a 10-per cent stake in the "new" GM, but have the option to take up to 15 per cent more in future.
The United Auto Workers union also backed a new labour contract that brings workers' wages and benefits down to the level of foreign manufacturers operating in the US. A union health-care trust will also get a 17.5-per cent stake in the reorganised firm.
But a number of investors believe the UAW was unfairly favoured over smaller bondholders' claims, and have vowed to try to block the deal in court.
"No one seems to have the best interests of small bondholders at heart," said Jim Martin, who helped organize a group calling themselves Main Street Bondholders.
GM is expected to name Al Koch, a managing director at the firm AlixPartners LLP, as its chief restructuring officer during the bankruptcy process, the Wall Street Journal reported, citing unnamed sources. Koch oversaw the bankruptcy of KMart Corporation.