THE NEWS: General Motors Corp. (GM) filed for Chapter 11 bankruptcy protection in New York on Monday. The pre-packaged plan leaves the federal government in control of a downsized auto maker, faced with the weakest market conditions in a generation.

Meanwhile, a revamped Chrysler is poised to exit bankruptcy reorganization as early as Monday after a U.S. judge approved the $2 billion sale of the bulk of its assets to a group led by Fiat SpA (FIATY).

THE DETAILS: Judge Robert Gerber was named to preside over the GM bankruptcy, the largest-ever U.S. industrial bankruptcy filing, with the first hearing set for 4 p.m. EDT Monday.

The Obama administration on Sunday said the government would provide an additional $30 billion in financing to GM in return for 60% equity in the new company and $8.8 billion in debt and preferred stock. Canada and Ontario are injecting $9.5 billion for a 12.5% stake. The U.S. is providing a $33 billion DIP loan to keep GM running.

The U.S. administration's auto task force has gotten provisional backing from a majority of bondholders and unions representing workers in the U.S. and Canada, moves likely to ease its passage through court.

President Barack Obama said the cost of building a leaner GM will be painful, but a collapse of GM or Chrysler would have been devastating to the country. He lauded Chrysler's "quick, surgical" bankruptcy.

Chrysler Group LLC will be controlled by the U.S. and Canadian governments, a union-run trust fund, and a group let by Fiat.

The bulk of GM's global operations will be combined in the "New GM," and the company aims to secure a sale of the legacy assets to the new entity by July 18. The company said its global manufacturing and distribution network remains intact, and only the U.S. entity has filed for protection from creditors.

A majority stake in GM Europe is slated to be sold to a consortium led by parts maker Magna International Inc. (MGA), though the entity will be held in trust by the German government pending an agreement that could take several weeks to finalize.

GM CEO Fritz Henderson declined Monday to predict when the company will again be profitable, and he downplayed any worries about the government interfering too much in company operations. In a bankruptcy court filing, Henderson said the U.S. Treasury will keep funding GM's restructuring only if the company gets court approval by July 10 to sell its most valuable assets to a new entity, the "New GM."

MARKET REACTION: U.S. stocks gained despite GM's bankruptcy filing, with the Dow Jones Industrial Average rising 232 points to 8732. GM shares rose 18% to 89 cents, even though they will no longer be listed on the New York Stock Exchange by Tuesday. General Motors' benchmark bonds due 2033 are quoted around 15 cents on the dollar, according to Timothy Doherty, analyst at KDP Investment Advisors. The bonds doubled in value Monday after the firm filed for Chapter 11. The bankruptcy filing triggers the settlement of around $3 billion in credit-default swaps written against the auto maker. Settlement of the CDS contracts will determine how much GM's bonds are worth in a restructuring.

WHAT HAPPENS NEXT: The key question now for GM is: Will it work?

Judge Gerber is crucial to determining whether the task force plan to have GM exit protection within 90 days is, in fact, realized. The treatment of bondholders could still see challenges to the plan in court.

The main question for GM is how it plans to accelerate the operational turnaround and revise the planning forecasts rejected by the task force at the end of March. The operational plans will affect the distressed auto supplier sector, which supplies about 70% of the content by value to manufacturers. GM said it will keep plants running through the bankruptcy, but will shutter 14 factories and three parts centers by the end of 2011.

THE MARKETPLACE: U.S. light vehicle sales are expected to fall to around 10 million this year from 13.1 million in 2008 and 16.1 million in 2006. With GM and Chrysler cutting back production further, rivals are stepping up output to take advantage of negative customer perceptions of bankrupt auto makers.

For more Dow Jones coverage, please see:

General Motors Files For Bankruptcy 
Obama: 'Viable, Achievable' Plan Gives GM Chance To Rise Again 
Bankruptcy Gives GM Opportunity, 'Huge Responsibility' -CFO 
US Judge Approves Chrysler Assets Sale To Fiat 
GM Liquidity Plunges Below $10 Billion -Source 
GM-Owned Dealership Files For Chapter 11 Bankruptcy 
GM: 14 Plants, 3 Parts Centers To Close By 2011 
Judge In Adelphia Bankruptcy Gets GM Chapter 11 Case 
US Role In GM Bankruptcy Raises Foreign Auto Concerns 
GMAC Won't File For Bankruptcy, Still Meets Obligations 
White House: Obama To Address Nation On GM Monday Morning 
GM Schedules Press Conference To Follow Pres Obama's Remarks 
'New GM' Products Face Triple Market Challenge 
GM Filing Will Trigger Settlement Of $3 Bln In CDS Deals 
GM Won't Predict When It Will Return To Profitability - CEO 
CEO: Treasury Sets July 10 Deadline For GM Sale 
Canada PM: Auto Bailouts Big Part Of Increase In Deficit

(Doug Cameron and Nicole Campbell contributed to this report.)