Taxpayers will have a big chunk of GM

DETROIT - The government's new road map for General Motors would briefly send it into bankruptcy, erase most of its debt and eventually have it emerge leaner and stronger - and almost three-quarters owned by the taxpayers.

The outline came together yesterday after a bloc of GM's biggest bondholders agreed to a sweetened deal proposed by the Treasury Department to wipe out the automaker's unsecured debt in exchange for company stock.

But GM still must settle on a buyer for its European Opel unit and decide the fate of its Hummer and Saturn brands, while workers across the country await news expected Monday on which 14 plants the company will close, shedding 21,000 more jobs.

Efforts to sever its relationship with 2,600 dealers will probably be tied up in the bankruptcy proceedings.

A person familiar with GM's plans said that it was "probable" that the company would file for bankruptcy protection Monday - the government's deadline for GM to restructure.

Under the proposal, outlined in a regulatory filing, GM's good and bad assets would be separated under what the Obama administration hopes will be a speedy Chapter 11 reorganization that will let GM thrive when people are ready to buy cars again.

The U.S. Treasury, which already has loaned GM $19.4 billion, would get 72.5 percent of the new company's stock and provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection.

Canada's government is expected to provide an additional $9 billion, a senior Obama administration official said. The official spoke on condition of anonymity because of the sensitivity of the negotiations.

A United Auto Workers trust that will take over retiree health-care expenses will get 17.5 percent, and the old GM, effectively owned by the bondholders, would get a 10 percent stake.

GM's existing shareholders will probably lose everything. "It's fair to say that there would be little to no recovery," the administration official said.

The proposal is similar to what has happened to Chrysler, already in Chapter 11 protection. A bankruptcy judge is weighing whether to approve the sale of most of its assets to Italian carmaker Fiat.

The administration official estimated that GM would be under bankruptcy protection for 60 to 90 days, longer than Chrysler's expected reorganization because GM is bigger and more complex.

The official said that although the government hopes to get back as much of the money loaned to GM and Chrysler as possible, it never envisioned recovering much of the initial $13.4 billion in aid.

Eventually, the government hopes, GM can return to profitability, which would allow the government to sell its GM stock. But the risks for taxpayers are daunting, with U.S. auto sales near their lowest level in 27 years. *