GM's Big End

General Motors (GM) will file for bankruptcy protection on Monday, the Detroit Free Press, the Wall Street Journal and the Financial Times all report this morning. The path to Chapter 11 restructuring was made easier yesterday when major GM investors were said to have accepted a sweetened deal that would hand bondholders up to 25 percent of the restructured company on the condition they forgave "$27 billion in unsecured debt and pledge[d] not to oppose the reorganization in court." Initially, the U.S. government will control more than 70 percent of a new GM with the United Automobile Worker's health care trust guaranteed 17.5 percent and the bondholders 10 percent. However, both the bondholders and UAW's stake could rise as they are being offered additional warrants in GM that could be exercised as the restructured company increases in value.

By getting the bondholders onboard and reducing the creditor list, the government is trying to fast-track GM out of bankruptcy protection and in the process split the auto giant into two parts—call them healthy GM and toxic GM. In what Bloomberg calls the most "rosy scenario, the new company, armed with vehicles from GM’s Cadillac, Chevrolet, Buick and GMC divisions, plans to begin making money again within 60 to 90 days, while a bankruptcy court sells or liquidates unprofitable brands such as Saturn and Hummer." The model would mimic the similar "straight outta bankruptcy" strategy being embraced by another struggling car maker, Chrysler LLC. "They are clearly trying to clear a path for a very quick Chrysler-style case ... [and] will use the bankruptcy code to separate ‘good GM’ from ‘bad GM,’ ” Seton Hall bankruptcy expert Stephen Lubben tells Bloomberg. In Germany, the negotiations to buy Opel, the jewel in GM Europe's crown, is caught up in a German-Italian spat. This morning Fiat announced it wouldn't attend a meeting in Berlin "at which a preferred bidder for GM Europe is to be chosen [because] the German government was being 'unreasonable' in asking for extra funding from it," the BBC reports. Germany already is being accused of trying to protect German-based Opel jobs over UK-based Vauxhall [the other major GM Europe brand] employees as it oversees the sale of the stricken company.

Headline writers were reaching for their divorce analogies yesterday as Time Warner (TWC) decided to bring an end to its eight-year union with AOL. As the Wall Street Journal writes (or crows, to be more exact), "the first big marriage of bricks and clicks is officially kaput," adding that Time Warner "will finally split off its AOL division, fully unwinding the disastrous 2001 deal that joined a media giant and a dot-com darling." The TW-AOL merger was supposed to be the best-case realization of the "synergy" possible by combining old media and new media properties. Instead the "deal has been regarded in recent years as one of the largest blunders in corporate history," writes the Washington Post. Indeed, adds the WSJ, "the $100 billion merger has become a sort of antiplaybook for corporate deals. It soon became clear the value of AOL had been inflated by improper accounting practices and revenue overstatements, and the company endured multiple regulatory probes and billions of dollars in write-downs." So what next for AOL? At least it will be free to chart its own path free from the pressure of contributing to Time Warner's bottom line, but whether the newly liberated company can thrive is another matter. CEO Tim Armstrong faces a daunting task of reversing a steep decline in AOL's advertising sales as well as integrating some $2 billion in recently acquired businesses.

There's no bottom yet for Dell (DELL). The struggling PC maker reported a 23 percent drop in revenues yesterday, "the third consecutive quarter of shrinking sales and profit at the company, whose turnaround efforts and new products have been unable to arrest its slide," the WSJ writes. The big culprit is a slowdown in business spending. "Demand is still not improving," Dell CFO Brian Gladden told analysts. Despite the murky outlook, Dell shares are doing just fine, BusinessWeek reports. Dell shares have risen 35 percent in the past three months on hopes corporations will start buying new hardware again after Microsoft (MSFT) introduces the Windows 7 operating system. Still, a revival in the PC sector looks illusory. "You'll see a lot of bad news continue in the PC world for the time being," an analyst told BusinessWeek.

Staying in tech, Microsoft and Google (GOOG) were vying again yesterday for top billing among the geeks with new product launches. Microsoft plans to yet again take on Google in search with Bing, an all-singing, all-dancing search engine. According to the WSJ, Microsoft will spend between $80 million and $100 million in a major ad splash to convince Web users there's an easier way to search than by simply heading straight for Google. And Google's response? It plans to "reinvent email," as the Financial Times puts it, with Google Wave. The service, which includes a range of tools for communicating and collaborating over the internet, will be introduced later this year. It is "what e-mail would look like if it was invented today," boasted Lars Rasmussen, the Google developer behind the project.

Finally, while shoulder pads and other strains of 1980s fashion might be making a comeback, the same can't be said for Christian Lacroix, the extravagant designer who rode to fame on a train on frilly haute couture frocks. Yesterday the fashion house bearing his name filed for bankruptcy protection in a Paris court.