Yesterday, automotive parts supplier Lear (NYSE: LEA) announced that it is preparing to file for Chapter 11 bankruptcy protection. The company has also lined up financing to fund operations while it is under court protection.

LEA's subsidiaries outside of the United States and Canada will not be a part of the bankruptcy filing. According to the company, its "operations outside the United States and Canada are well-capitalized, well-positioned and have a strong backlog of new business."

Auto sales continued to drop in June, but we are starting to see signs that sales may be beginning to stabilize a bit.

The auto industry is still in deep trouble. It is going to take a while before things get back to normal, but before things can even start to improve, they have to stop worsening, and that's what may be happening.

General Motors (NYSE: GM) announced this morning that not enough of its bondholders agreed to swap its debt for company stock, pushing the automaker even closer to bankruptcy. GM was offering to exchange $27 billion in unsecured debt for 10% of the company's stock. The struggling Detroit damsel has until Monday to finish its restructuring or it will file for Chapter 11 bankruptcy protection. This deadline was set by the government and includes requirements regarding debt reduction, labor cost cuts and plant closures.

According to the Financial Times, General Motors (NYSE: GM) expects "as many as three bids" for a strategic stake in its European arm by today's deadline. GM Europe spokesman Chris Preuss stated, "Based on conversations that are ongoing, the expectation is that there will be three bids put on the table." GM expects to rake in $887 million for the division.

The report quotes "two people close to the deal, who requested anonymity" as saying the three bids could come from Fiat, Canadian parts manufacturer Magna, and Brussels firm RHJ International.

Bright and early this morning, Ford (NYSE: F) announced that it is going to invest $550 million to transform its Michigan Truck Plant to a more modern small-car plant. The plant will produce a new Ford Focus, which will be available next year.

In 2011 the automaker will begin producing its battery-electric Focus in an effort to meet its promise to deliver four new electric vehicles in America by 2012. The plant was originally used to produce the Ford Expedition and Lincoln Navigator, both massive SUVs. It was one of the most prolific and profitable Ford operation during the SUV explosion of the late 90s, and the move symbolizes a strategic shift by the American icon.

Early this morning, the Associated Press reported that talks between Chrysler's lenders and the Treasury Department had "disintegrated." The parties were trying to lower Chrysler's $6.9 billion in secured debt, a move that many hoped would stave off bankruptcy.

It appears that the hedge funds (roughly 40 of them) that hold roughly 30% of Chrysler's debt are looking for a deal better than the one struck between the banks and the government. The four banks that hold 70% of the automaker's debt agreed to erase that debt for $2 billion -- the hedge funds want more.