General Motors Corp. (GM) has to settle and restart billions of dollars in supplier contracts in what could be a key test of plans for a smooth bankruptcy exit, a person familiar with the matter said.

The auto maker needs its bankruptcy judge to approve the sale of its "good" assets to the U.S. government, a union-run health trust and others by July 10, to retain access to federal funding.

GM must resolve supplier liabilities to the satisfaction of the court and those suppliers before business gets under way at the "New GM," according to the person, with the expectation that some may challenge GM's valuation of past debts.

The health of GM suppliers has remained a focus throughout the Chapter 11 proceedings, as many auto suppliers are either on the brink of bankruptcy or already in protection.

GM Chief Executive Fritz Henderson has said more suppliers are at risk of going under if GM fails to exit bankruptcy and return to more normal operations soon.

The company plans to roll over the majority of its supplier contracts to the new company, and the terms of those deals wouldn't change after its exit from bankruptcy, the person said.

However, before the new contracts can begin, GM must settle any bills incurred before or during bankruptcy. A number of suppliers top the list of GM's biggest unsecured creditors, with some saying the auto maker owes millions.

GM owes $111 million to bankrupt parts maker Delphi Corp. (DPH) and $45 million to Lear Corp. (LEA), which said Wednesday it plans to file for Chapter 11, according to court documents.

Suppliers can appeal if they feel GM isn't giving them the proper amount. So far, the person familiar with the matter said, few suppliers have disputed GM's cost tallies, though there is an expectation that some eventually will.

Chrysler Group LLC, which emerged from an expedited bankruptcy last month, managed to settle past debts and restart supplier contracts with the new company with relative ease.

GM entered bankruptcy protection on June 1 and could emerge as a new company - owned by the U.S. and Canadian governments, the United Auto Workers and existing bondholders - sometime this month.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@dowjones.com.