WASHINGTON AND LOS ANGELES — The drastic reinvention plan that General Motors Corp. unveiled Monday would leave the onetime world goliath a smaller, leaner company -- with its legendary Pontiac brand discontinued -- but puts the automaker on a collision course with bondholders that could still land it in Bankruptcy Court.
GM proposed a painful downsizing that would eliminate 21,000 workers, 2,600 dealers, $44 billion in debt and four brands -- while making the U.S. government majority owner of what was once the world's largest company.
Separately, employees at Chrysler are poised to become majority owners of that troubled company if they approve a deal struck Sunday between the United Auto Workers union and the carmaker.
Factory-level union leaders unanimously recommended Monday that the rank-and-file members approve a deal giving them a 55% stake. The U.S. government and Chrysler's secure lenders would together get 10%, and Italian automaker Fiat, which is negotiating a takeover of Chrysler, would eventually end up with a 35% stake.
At GM, the dramatic changes would allow the company to survive even the current woeful economic conditions, and to thrive when the market rebounds, analysts said.
First the automaker must pull off what it conceded would be a tough task: getting banks and other holders of $27 billion in company debt to exchange nearly all of it for GM shares -- and to do so under terms that are much worse than those offered to the U.S. Treasury and the UAW for some of the money owed to them.
The bondholders blasted the proposal, calling it "neither reasonable nor adequate." A committee representing some bondholders issued a statement saying the plan "amounts to using taxpayer money to show political favoritism of one creditor over another."
And GM still isn't done negotiating with the UAW, which is trying to preserve as much of its retirees' healthcare trust as possible.
But investors liked the plan, sending GM stock up 21% on Monday to $2.04.
Pontiac workers who faced a shutdown of the brand by the end of 2010 were nervous. At a plant in Fremont, Calif., that produces the Pontiac Vibe and Toyota Matrix through a joint venture between GM and Toyota Motor Corp., employees were uncertain about their futures.
"We always assume there will be something coming down the line," said David Busbee, 45, who has worked there for more than two decades, most recently in quality assurance. "Car models change. But it's maybe the end. We've all started to question the options we have."
