GM offers final survival plan

By David Bailey and Poornima Gupta

DETROIT (Reuters) - General Motors Corp on Monday offered its final plan to reorganize outside bankruptcy by slashing bond debt, cutting over 21,000 more U.S. jobs and emerging as a nationalized automaker under majority control by the U.S. government.

GM Chief Executive Fritz Henderson said the automaker would file for bankruptcy protection if an offer to exchange bonds for company equity failed to cut $27 billion in bond debt by about 90 percent or other changes faltered.

Analysts doubted the debt exchange offer would succeed, setting up GM to restructure in Chapter 11.

GM's bondholder's blasted the terms of its debt-exchange as a back-room deal designed to protect the interests of its major union the United Auto Workers, a group that campaigned for President Barack Obama in last year's election.

Representatives of the bondholders said GM and the Obama administration were gambling on a risky and "legally questionable" strategy for a company that once ranked as an icon of American industrial and economic strength.

The White House said on Monday the U.S. government had no desire to run a domestic automaker despite the potential controlling interest.

"We strongly back an auto industry that we believe can and should be self reliant," White House spokesman Robert Gibbs told reporters. "It is not our desire to either own or run one of the auto companies."

GM's new strategy, which will also jettison the Pontiac brand and shut down production of Saturn brand cars this year, underscored how quickly and far it has fallen since last summer when executives, including Henderson, were insisting that the automaker could restructure under a program of "self help."

Separately, Chrysler lenders were expected to receive a new offer from the U.S. Treasury as early as Monday in the wake of cost-cutting deals the U.S. automaker has reached with unions in the United States and Canada.

Chrysler faces an April 30 deadline to reach a deal with creditors and cement an alliance with Italy's Fiat SpA and continue to receive U.S. government emergency support.

The automaker was working "diligently" to complete the Fiat deal and restructure its business by the deadline and maintain government emergency loans, Chief Executive Bob Nardelli said in a memo to staff obtained by Reuters.

Chrysler cleared another hurdle in its reorganization on Monday when Daimler AG reached a deal to divest the nearly 20-percent stake it had held since selling Chrysler to Cerberus Capital Management LP in 2007.

Canadian Industry Minister Tony Clement said it was now more likely Chrysler would not have to go into liquidation following an agreement with the Canadian union that Fiat has concluded is cost-effective.

GM: 60-DAY BANKRUPTCY POSSIBLE

GM's new offer to bondholders would leave them with a 10 percent ownership of the restructured automaker, a sharply lower payout than the nearly 40 percent given to the UAW.