It may be the end of the road for troubled US auto maker General Motors with US Treasury directing the company to prepare plans for a bankruptcy filing by 1 June. While GM's chief executive, Fritz Henderson, is still working on plans to salvage a part of the company, he has tasked staff to work with legal and government advisers to prepare for bankruptcy filing, although he maintains it is not inevitable.

A new plan under consideration would create a new company that would buy the ''good assets'' from GM almost as soon as the auto major files for bankruptcy.

Other assets from unwanted brand, factories and health care obligations would remain with the old company to be liquidated over a few years.

Treasury officials are reportedly assessing a scenario in which the ''good GM'' with $5 billion to $7 billion of federal financing enters and exits bankruptcy in about two weeks.

Resolving the issues of the rest of GM may require as much as $70 billion in government funding according to experts and federal officials. They say that additional funds would be required to resolve the problems of health care obligations and liquidation of factories.

According to John Paul MacDuffie, associate professor at the Wharton School at the University of Pennyslyvania, an out-of-court restructuring was unlikely to be acceptable to the Obama administration given its rejection of an earlier restructuring plan drawn up in March. The plan had failed to factor-in the concessions that were required from bondholders and the union, on which an agreement has still not been reached.

Professor MacDuffie said that, simply put, GM took the loans with conditions and GM neither proved their case for financial viability nor did it meet the deadline.

According to executives with bankruptcy experience GM lawyers and the government have much work to do before any bankruptcy case can be initiated.

They say that GM would first have to formulate a business plan that would address all aspects of the company which it aims to transform while under bankruptcy protection.

Further it would have to present viable plans for saving billions of dollars through agreements with its bondholders and unions. The plan would have to detail how many dealers it would keep and the plants and offices it would close or continue to operate, they add.

Besides the plan would also have to give a candid forecast of the car market a tricky proposal in the backdrop of uncertain conditions of falling sales they say.

Meanwhile General Motors Corp's bondholders are reportedly preparing legal arguments against the auto major's bankruptcy plan.

According to reports bondholders are worried at the prospect of being pushed into accepting hefty losses on their investments and members of an ad hoc committee of GM bondholders have voiced concerns to the task force of Obama administration.

The Obama administration has hired the Boston Consulting Group to help with the business plan according to a US government website FedBizOpps.gov.

Banks may also be needed to participate in the process. With the uncertain economic conditions, lenders are expected to pressure GM to wring as much out of its operations as possible.

Finally according to legal experts GM would have to take steps to prevent panic among consumers in case of a bankruptcy filing. Meanwhile, the US government has said it would support GM vehicle warranties.