WRAPUP 3-GM offers final survival plan, bond deal

*GM to cut 21,000 US factory workers; drop Pontiac
*New GM would be 89 pct-owned by US government, UAW
*Chrysler lenders expected to receive new Treasury offer
*Daimler cuts last ties to Chrysler
*GM shares close up nearly 21 percent, GM bonds up

(Adds Daimler move, comment from GM bondholders)
By David Bailey and Poornima Gupta
DETROIT, April 27 (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. [nN27471653]
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. [N27181175]
The White House said on Monday the U.S. government had no
desire to run a domestic automaker despite the potential
controlling interest. [nWEN7914]
"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. [nN26499954]
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. [nN27522327]
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. [N27177782]
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.
"The offer is unlikely to be accepted by bondholders, who
are in effect being asked to sacrifice most of their claims in
order to help GM satisfy commitments to the UAW," Barclays
Capital analyst Brian Johnson said.
Henderson, GM's CEO, told reporters that it was possible
for GM to complete the bankruptcy process within a 60-day
period, but called the success of the bond exchange critical
for the automaker to stay out of court.
"The bond exchange needs to be successful for us to avoid
bankruptcy," Henderson said. "It's not impossible, but
bankruptcy is now more probable."
The new GM that would emerge from the restructuring would
be 89 percent-owned by the U.S. government and the UAW,
provided workers and officials approve the plans. Current GM
stockholders would have 1 percent.
GM shares closed nearly 21 percent higher at $2.04. GM
bonds also moved higher.
Still, Standard & Poor's equity analyst Efraim Levy
maintained a "sell" rating on GM shares.
"Whether there is a bankruptcy filing or not, we see it as
lose-lose for shareholders via dilution from equity issuance or
loss of value via a filing," Levy said.
Responding to criticism that its prior turnaround plans
had been too slow-moving, GM also outlined deep cuts by the end
of 2010: reducing U.S. plants to 34 from 47, slashing U.S.
factory jobs by about 21,000 to a total of 40,000, and cutting
its dealer network to 3,605 from 6,246 stores.
The Obama administration's autos task force, which has been
overseeing GM's planning for the past month, said the steps
showed the automaker was making progress toward viability.
"Today's bond exchange filing represents an important step
in GM's effort to restructure," the task force, headed by
former investment banker Steve Rattner, said in a statement.
[nN27521840]
GM, which last week took $2 billion of emergency U.S.
government loans to bring its total to $15.4 billion so far,
was told by the Obama administration in late March it had until
June 1 to dig deeper and move faster for continued support.
The automaker said it would phase out the Pontiac brand by
the end of next year and could stop production of its Saturn
models by the end of 2009. A sale of the Hummer SUV brand is
still a "reasonable likelihood," Henderson said.
The steps would leave GM, formerly the world's largest
automaker, reliant on four core brands -- Chevrolet, Cadillac,
Buick and GMC -- and a network of international alliances as it
looks to sell off its European unit Opel.
(Reporting by David Bailey, Kevin Krolicki, Soyoung Kim and
Poornima Gupta, Nick Carey, John McCrank, John Parry and Caren
Bohan; editing by Dave Zimmerman, Matthew Lewis and Carol
Bishopric)
((david.bailey@thomsonreuters.com; + 1 313 967 1910; Reuters
Messaging: david.bailey.reuters.com@reuters.net))
Keywords: AUTOS/

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