GM All but Certain to File for Chapter 11

A man with boxes of documents related to the Chrysler bankruptcy case waits in line to enter Bankruptcy Court in New York, Wednesday, May 27, 2009. (AP Photo/Seth Wenig)

(AP)

General Motors, the company that put tail fins on a Cadillac and was once the nation's largest employer, moved to the edge of bankruptcy protection Wednesday as debtholders refused a last-ditch deal. Crosstown rival Chrysler hoped to pull off a quick exit from Chapter 11 and prove there is hope yet for a leaner Detroit.

Investors who are owed billions of dollars by GM rebelled against a plan to accept a sliver stake in the company in exchange for their bonds, one of the government-imposed conditions for restructuring out of court.

A bankruptcy protection filing could come within days — perhaps around Monday, which had been the government deadline for GM to reorganize.

Meanwhile, Chrysler began a marathon session in federal court in New York, trying to persuade a judge to sign off on its plan to sell most of its assets to Italian automaker Fiat. After nine hours of testimony, the judge adjourned the hearing until Thursday morning and said a decision may not come until Friday.

Since Chrysler entered bankruptcy protection four weeks ago, its sales have fallen but not tanked, raising hopes that both automakers might be able to shed debts and modify contracts under court protection and emerge leaner, stronger and more competitive.

The U.S. government has pledged to back both companies' warranties to reassure consumers their purchases will be protected no matter what happens. Analysts say that seems to be helping Chrysler, where sales during the first two weeks of May fell at about the same rate as the whole U.S. market.

At the Jack Maxton Chevrolet dealership in the Columbus, Ohio, suburb of Worthington, it appeared to be business as usual Wednesday even as GM contemplated Chapter 11.

One salesman took a family on a test drive, a man put on his glasses to take a closer look at the sticker for a new Camaro, a car was being cleaned by the service department's automatic car wash and the receptionist was busy routing phone calls.