General Motors Corp prepared to announce its exit from bankruptcy on Friday after a 40-day reorganization under U.S. government backing that wiped away most of the debt and recurring costs that drove the 100-year-old automaker to crisis.

A court order allowing GM's key assets to be sold to a new company that will be more than 60 percent-owned by the U.S. Treasury took effect on Thursday and the risk of a complicating legal appeal appeared to fade.

The close of the court-approved sale would mark the completion of an unprecedented effort by the Obama administration to save GM and Chrysler from liquidation by slashing debt, labor costs and dealerships.

The White House has also disbursed almost $80 billion to shore up the auto industry, including $5 billion in support for auto parts suppliers.

Chrysler exited bankruptcy a month ago after blazing a precedent-setting trail for GM by following an asset sale plan that gave operational control of the smaller automaker to Italy's Fiat SpA .

GM Chief Executive Fritz Henderson and Ed Whitacre, a veteran telecommunications executive who will become chairman, were scheduled to appear Friday at the automaker's Detroit headquarters to mark the launch of a new GM.

The new company can only be good, said Mark LaNeve, GM's sales chief, who was speaking to reporters in Washington.

I'm very much looking forward to the point where we're operating in the clean air and the name of the company not being associated with bankruptcy, he said.

Bob Lutz, GM's outspoken and high-profile product chief, has also agreed to stay on in a new position, reversing an earlier plan to retire at the end of 2009, a person with direct knowledge of the plan said.

GM Vice Chairman Tom Stephens will remain in charge of GM's product planning, the role he took when Lutz stepped down earlier this year, said the person, who could not be named because the change in plans for Lutz had not been announced.

Meanwhile, a federal judge in New York on Thursday denied a request by a committee of asbestos personal injury claimants to delay the sale of GM pending its appeal.

Judge Lewis Kaplan said in court documents that the stay of the sale would likely lead to the liquidation of GM.

The bankruptcy court overseeing GM's case had previously said the sale of the automaker's key operating assets could go forward after noon Thursday.

The sale will create a new GM that will be 60.8 percent-owned by the U.S. Treasury and 11.7 percent-owned by the governments of Canada and Ontario.

A retiree trust fund affiliated with the United Auto Workers union will hold 17.5 percent of the equity.

The remaining 10 percent equity in the new GM will be credited to the old GM, a corporate shell that will remain in bankruptcy as it looks to sell off unwanted assets for pennies on the dollar.

At the same time, the new GM will have slashed its debt and healthcare obligations by $48 billion, dropped almost 40 percent of the dealers from an unprofitable network and moved to cut loose laggard brands such as Saab, Saturn and Hummer.

The new GM will also take advantage of a new labor contract with the UAW that the company says will put its hourly operating costs on par with Japanese competitors led by Toyota Motor Corp. <7203.T>

Friday's announcement would complete GM's bankruptcy process in just over a month -- a faster timetable than even the aggressive target set by the Obama administration when it stepped in to restructure GM and Chrysler.

Richard Hahn, co-head of the restructuring and bankruptcy practice at the law firm Debevoise & Plimpton LLP, said the fast pace of the twin auto bankruptcies showed that the courts had given weight to the lack of financing for alternatives to the Obama administration's plans.

Judges proceeded quickly in these cases because they were told the companies were bleeding and there was no other financing, Hahn said.

(Additional reporting by Phil Wahba and Jui Chakravorty in New York, David Bailey in Detroit and Mari Saito in Washington)

(Reporting by Caroline Humer, with additional reporting by Grant McCool and Kevin Krolicki in Detroit; Editing by Maureen Bavdek and Steve Orlofsky)

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