A new "chapter" in GM's history starts Monday.

General Motors President and CEO Fritz Henderson will host a press conference on Monday, June 1. The conference will be around mid-day at the GM Building, 767 Fifth Avenue, in New York.

It is likely that Henderson will announce that GM will seek protection under Chapter 11 of the U.S. Bankruptcy code.

As we reported previously, GM’s exchange offers of debt-for-equity for $27.2 billion of its unsecured public notes expired on May 26, 2009, and therefore  it will not meet the requirements  imposed by the Treasury Department for a viable company under its restructuring plan. GM’s Board of Directors is now discussing next steps. Only 15% of Bondholders agreed to that deal, which would have given them 10% of the company.

The U.S. Treasury then extended and modified the offering to objecting bondholders, saying accept the 10% stake now in a reorganized GM as originally proposed, and eventually another 15% of the new company will be offered by way of stock warrants.

The GM reorganization that Treasury is dictating as the largest debtholder involves the sale of substantially all of GM’s productive assets under Section 363(b) of the U.S. Bankruptcy Code.  This would allow a “New GM” to emerge with a healthy balance sheet, while the Old General Motors Corporation is dissolved and its creditors paid off from what little remains.

The U.S. Treasury’s proposal expires at 5:00 pm EDT, Saturday, May 30, 2009. The new Treasury deal also requires “statements of support satisfactory to the U.S. Treasury” indicating that bondholders will not oppose the so-called 363 bankruptcy sale. If bondholders do not go along,  Treasury says it will not support even a 10% payoff.

The Treasury-revised deal is clearly designed to head off bondholder objections to a GM reorganization, which will help streamline a bankruptcy filing that is now coming  next week. It is vital to GM’s chances for survival that it emerge as quickly as possible from receivership. Sales have plummeted by almost half this year as it became clear that GM was insolvent and the few car buyers that remain in the depressed global markets went elsewhere.

For the third day now Chrysler bondholders are arguing in U.S. Bankruptcy Court in New York against a similar reorganization proposal and 363 sale of  its productive assets to Fiat, while Old Chrysler LLC is dissolved and bondholders and other debtors divide the little that’s left.

More than 300 objections to the Chrysler sale have been filed by creditors and bondholders who would rather see a complete dissolution and sale of the company, based on their highly dubious proposition that in a depressed auto market they would get more money from selling everything and grow fatter  — like vultures picking at a corpse.

There are no buyers out there for automotive assets right now, and bondholders prove that very proposition by refusing to buy into the reorganized company themselves by accepting equity for debt.  Chrysler, too, is saddled with plummeting sales, making its own quick emergence from bankruptcy vital to its survival. Whether common sense prevails at Chrysler — or GM — remains to be seen.

Under the GM reorganization now proposed, U.S. taxpayers would own 72.5% of New GM.