GM’s latest plan would cede control to U.S.

Posted on Tuesday, April 28th, 2009 at 12:32 PM EDT.

The U.S. Treasury Department would own a majority of General Motors Corp. and have the right to appoint all of its directors, under the company’s turnaround plan unveiled Monday—the latest sign of the government’s growing role in the automaker’s restructuring, according to The Detroit News.

The administration also told the Detroit automaker it wouldn’t support giving bondholders any more than 10 percent equity in the company, the paper reported. That hard-line offer could be a major factor in bondholders rejecting the exchange and forcing GM into bankruptcy, analysts told The News. The Obama administration has boosted the percentage of debt it wants the automaker to write off to at least 90 percent, up from two-thirds, the paper said.

GM’s bondholders came out swinging, saying the company’s offer of just 10 percent equity in exchange for $27.2 billion in bonds was inadequate, the News said.

“This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court, instead of engaging its lenders and workers in the very type of negotiations that could avoid such a fate,” an ad hoc committee of GM’s bondholders said told the paper. (The Detroit News)

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