General Motors Corp., which filed for for court protection under U.S. bankruptcy laws today, said it expects to spend up to three months in bankruptcy before re-emerging as a smaller, leaner company.

The firm will carry will carry on with only its four most profitable car brands: Chevrolet, Cadillac, GMC, and Buick. Car sales are expected to drop to 10 million vehicles compared with up to 17 million between 1995 and 2007.

The firm will reduce salaried employees in 2009 from its year-end total of 35,1000 to 27,000.

It has asked a federal court permission to honor car warranties, finance suppliers and retail customers and pay employees and dealers.

GM will also use the courts to offload its debts and reduce costs. It expects debt to come down from $54 billion as of March 2009 to $17 billion after the company emerges from bankruptcy. This week, the firm reached agreements with its biggest union, the United Auto Workers.

GM plans to sell substantially all its assets to the “New GM” corporate entity under chapter 11 of the U.S. Bankruptcy Code. This sale already has the approval of the U.S. Treasury, its main union, and a ‘substantial’ portion of its unsecured bondholders.

Current dealerships will continue to service vehicles and honor warranties.

“We are going to do it once and do it right,” said GM chief executive Fritz Henderson of the bankruptcy filing, saying the court supervised process would accelerate and complete the company’s reinvention.

New Owners

The new owners of the company will be the U.S. Treasury, with a 60.8 percent stake, 11.7 percent by the Canadian and Ontario governments, 17.5 percent by the UAW, and 10 percent for unsecured bondholders and other unsecured creditors of GM.

GM Europe

In a separate announcement, GM Europe said it reached an agreement to receive €1.5 of bridge financing from the German government and has reached preliminary understanding to partner with Magna International Inc. regarding the firm’s Opel/Vauxhall assets, although details of the agreement will be worked out in the coming weeks.