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U.S. Directs GM to Prep for Bankruptcy

The Treasury Department is directing the automaker to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite General Motors' belief it can still reorganize outside court, a report says.

The Treasury Department is directing

General Motors

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to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite the automaker's belief it can still reorganize outside court, a report says.

The

New York Times

, citing people who had been briefed on the plans, reports the goal is to prepare for a fast "surgical" bankruptcy. GM insists a quick restructuring is necessary so its image and sales aren't damaged permanently.

President Obama's automotive task force spent last week talking to GM officials and its advisers in Detroit and Washington, the

Times

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reports. Those talks are expected to continue this week.

The preparations are aimed at assuring a GM bankruptcy filing is ready should the automaker be unable to reach agreement with bondholders to exchange about $28 billion in debt into equity in GM and with the United Automobile Workers union.

GM has so far received $13.4 billion in government aid. It faces a government-imposed deadline of June 1 to extract concessions from its union and other stakeholders as a condition for up to $16.6 billion in additional aid.

The

Times

reports one plan being considered would create a new company that would buy the "good" assets of GM almost immediately after the automaker files for bankruptcy. Other less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years, the newspaper adds.

Officials at both GM and the Treasury Department declined to comment for the

Times

.