DETROIT, June 1 (Xinhua) -- The largest U.S. automaker General Motors Corp. filed for Chapter 11 bankruptcy on Monday, and a Dtroit News report on gave some questions and answers on the automakers' bankruptcy on the same day.

    Q: Why is General Motors Corp. filing for bankruptcy?

    A: GM has lost 88 billion dollars since 2005 and used more cash last year than it generated through vehicle and asset sales. Unable to borrow money from the private sector because of the severe global credit crunch, GM asked the U.S. government last fall for emergency loans to stay in business, as did its ailing crosstown rival Chrysler LLC.

    The government has provided GM with more than 20 billion dollars in loans but that wasn't enough to keep the automaker going as a viable business unless it slashed its debts and obligations.

    Q: What will a GM bankruptcy look like?

    A: GM will file under Chapter 11 of the U.S. bankruptcy code, which allows a company to seek court approval to halt certain payments and cancel unprofitable contracts and leases while it continues to operate its business.

    Chapter 11 is designed to provide a "breathing spell" during which a company can reorganize its operations to emerge as a potentially successful firm.

    In a Chapter 11 bankruptcy, a company does not go out of business, and its management is not necessarily replaced.

    There are other forms of bankruptcy under U.S. law. For instance, if a firm is unable to reorganize its operations to become a viable concern, it goes into a Chapter 7 bankruptcy, where its assets are liquidated to repay creditors, starting with banks and other secured creditors.

    Q: For how long will GM be in bankruptcy?

    A: GM and the U.S. government are hoping for a brief bankruptcy lasting between 60 and 90 days. Some bankruptcy experts call that optimistic. GM's onetime components subsidiary, Delphi Corp., has been in bankruptcy for nearly four years.

    But Chrysler moved surprisingly fast through bankruptcy after filing in a New York court on April 30. A new company comprising Chrysler's valuable assets emerged from the bankruptcy process Sunday after a court approved the sale of the assets.

    Q: How can a firm speed up the bankruptcy process?

    A: One way a company can shorten the time it spends in bankruptcy is to conclude debt-reduction agreements in advance with some of its creditors.

    GM has concluded major cost-cutting agreements recently with creditors and other stakeholders:

    The United Auto Workers agreed to cost cuts that could generate1.3 billion dollars in annual savings for GM.

    Holders representing 54 percent of its bonds have agreed to a sweetened debt-for-equity offer.

    GM reached a preliminary deal Friday on the sale of a majority of its German auto subsidiary, Adam Opel GmbH.

    Additionally, under Section 363(b) of Chapter 11, a company can transfer its valuable assets and brands into a new company. In a process similar to what Chrysler underwent, GM's best assets would be sold to a "good GM," which could emerge quickly from bankruptcy, unencumbered by liens or claims. The "bad GM" with less desirable assets and unsecured claims is likely to remain in bankruptcy longer.

    Q: What requirements does GM need to fulfill before it can exit bankruptcy?

    A: GM must obtain the court's approval for the Section 363 sale process. The court also must approve the lead bidder for the "good" assets, in this case most likely to be the U.S. Treasury.

    Finally, the court must approve the asset sales.

    Q: What can a company's stakeholders expect in a bankruptcy?

    A: Banks and other secured creditors are first in line to be repaid. GM has around 6 billion dollars in secured debts, which are expected to be fully repaid.

    Bondholders and other unsecured creditors are being offered 10 percent of the equity of the new GM and warrants to purchase another 15 percent in exchange for 27 billion dollars in debt.

    Stockholders are expected to be almost entirely wiped out in a bankruptcy. GM shares closed at 75 cents Friday on expectations of an impending bankruptcy filing, but were trading in the 88-cent range by mid-morning today.

    A company in bankruptcy may ask the court to cancel unprofitable leases and contracts. GM, for instance, wants to slash dealer franchises to reduce the number of dealers to 4,100 from 6,100.

    Q: What happens to the dealers who stay with GM?

    A: GM will seek authority in its first-day hearing in court to honor customer warranties and dealer incentives for dealers who will remain in its network.

    Q: What happens to GM's suppliers and its workers?

    A: GM will seek the court's permission to continue paying suppliers. Last week, it paid 2 billion dollars to 1,500 of its suppliers in North America.

    The government will provide an additional 30 billion dollars in loans to GM, including debtor-in-possession financing, so that GM can pay suppliers and keep its business going during reorganization.

    GM has already worked out a cost-saving deal with the UAW, including concessions on retiree health care. GM also has agreed to give the retiree health care trust, the Voluntary Employees' Beneficiary Association (VEBA), 17.5 percent of the equity in the new GM and warrants to purchase another 2.5 percent in exchange for 20 billion dollars it was planning to pay into the fund.

    Q: Who will be the biggest shareholder in the new GM?

    A: Initially, the U.S. Treasury with around 60 percent. The governments of Canada and Ontario will own about 12 percent, with bondholders taking 10 percent and the VEBA trust 17.5 percent.

    Q: Does this mean GM is now "Government Motors?"

    A: Yes and no. The U.S. government is the controlling shareholder and will appoint the largest number of board directors, but the Obama administration sees itself as a reluctant shareholder and intends to sell its GM holding as soon as that is practical.

    U.S. Administration officials say the government will watch to protect the U.S. taxpayers' large investment in GM but will not interfere in day-to-day management.