The New York Times reported late Sunday night that the U.S. Treasury Department may be nudging General Motors (GM) toward bankruptcy. Citing sources who had been briefed on the plan but are not authorized to discuss the process, The Times says that the Treasury Department is directing GM to prepare for a bankruptcy filing by June 1st.

In case you have not been keeping up on the trials and tribulations of GM the automaker is currently continuing operations as a result of emergency loans provided by the government. Unlike the Bush administration, the Obama White House is taking a more active role with regard to companies receiving government aid and has already booted the CEO from the company.

The administration has told GM that it must dramatically reduce its costs and restructure in order to continue to receive aid. Many analysts believe that the only way to accomplish this is through a prepackaged bankruptcy.

One of the plans being discussed would create a “Good GM/Bad GM” structure, where a new company would emerge from bankruptcy with fewer brands and less obligations. The “bad GM” would then be unwound over a period of years according to the Times.

The administration’s plans fly in the face of GM’s desire to restructure its debt and avoid a bankruptcy proceeding. New CEO, Fritz Henderson says the company may still be able to satisfy the demands placed upon it in order to continue to receive aid. However, since March 31st, Henderson has sent very clear signals to bondholders and unions that bankruptcy is probable unless significant concessions are made.

“If we need to resort to bankruptcy, we have to do it quickly,” Mr. Henderson said in an interview with the Canadian Broadcasting Corporation.

According to NY Times sources, the “surgical” bankruptcy could take as little as two weeks to accomplish.

General Motors

General Motors

S&P 500

S&P 500