http://money.cnn.com/news/newsfeeds/articles/djf500/200905240443DOWJONESDJONLINE000298_FORTUNE5.htm

 Quote:
WASHINGTON (AFP)--General Motors Corp. (GM) is likely to take a page from Chrysler LLC's playbook in an expected bankruptcy that tests a legal strategy for a quick restructuring with heavy government backing, analysts said.

GM, which faces a June 1 deadline from the U.S. government to come up with a viability plan or face a cutoff of aid, is widely expected to follow rival Chrysler into bankruptcy and use a similar plan to emerge leaner and more competitive.

Yet the two companies could still face legal hurdles and loud objections from the financial sector in a test for the plan by President Barack Obama's administration to save the two automakers critical to the U.S. economy, analysts say.

"I think GM will learn a lot from the Chrysler bankruptcy," said one bankruptcy attorney, who asked to remain anonymous, but is familiar with the Chrysler case and represents auto industry clients.

"I would expect GM to file in the same court. The fast track was adopted by the bankruptcy court and it is key to GM as it was for Chrysler."

GM, which is widely expected to seek court protection even while it scrambles to win cost savings, would represent a much larger bankruptcy case with thousands of investors and other parties, but both firms are trying to shed debt and legacy costs including for vast numbers of retirees.

"I think (bankruptcy) will be a little smoother for GM," the attorney said.

"If I were representing GM I would get on the same railroad as Chrysler and ride it."

The notion of a quick, surgical bankruptcy is being touted by the administration as the only means of saving the critically important auto firms, but has nonetheless drawn fierce objections about skirting creditor rights to get a quick exit.

In the Chrysler case, and most likely in the GM case, the company may remain under court supervision but the key assets would be sold to a new entity free of most debt, providing a fresh start.

But some complain that the financial sector is being forced to make bigger sacrifices than the United Auto Workers union and others.

David Cole, chairman of the Michigan-based Center for Automotive Research, said the tough stand against holders of debt could prove costly over the long term.

"The government wants to be paid back and have an equity position and stick it to the financial industry," he said. "If I were in the financial industry I would be very suspicious."

Kent Engelke at Capitol Securities Management, said the administration plan for GM, based on reports, "is asking the senior debt holders to forgive $27 billion in debt for 10% of the company. The U.S. Treasury and the UAW will forgive $20 billion and receive 89% of the newly formed company."

The plan, he said, "sacrifices the senior debt holders for the unions. This is wrong, lacking legal precedent, violating the most basic rule of law and capital structure."