GM has submitted its final reorganization plan to the government; the plans call for the government and GM’s unions forgiving GM’s debt obligations in exchange for those two entities taking majority stakes in the auto company, thus avoiding a GM bankruptcy. Current stockholders are left in the cold, but 90% of them must agree to the restructuring. UAW would be given a 39% slice of GM in exchange for forgiving $10 billion in healthcare debt.

Megan McArdle writes that the plan talks of “an imaginary future where the bondholders evaporate into clouds of fairy dust, while American consumers mob its dealerships, begging for a piece of the GM dream.”

Rather than the $5 billion the government has previously said GM could be on the line to receive, GM asks in return for granting the majority stake a further $11.6 billion in bailout “loans.” GM asks the government to forgive half the loan debt in exchange for the GM stock.

GM will get rid of 40% of its dealers, axe the Pontiac division as of 2010 and lay off another 7,000 workers if the plan goes through as detailed. The company makes an offer that $27 billion in unsecured loans would keep it from bankruptcy, but CEO Fritz Henderson said that bankruptcy is a more likely option at this point. 90% of GM’s bondholders must agree to the plan as outlined in order for it to go through, and if GM cannot coax the bondholders into signing away most of their stock to the government, it will go into bankruptcy. Reports said Gm was “very likely” to ask a bankruptcy judge for the exact same terms. The return to stockholders would be “pennies on the dollar.”

The US government said Monday that it didn’t want to run GM or Chrysler, despite the news that the federal government would likely become the majority stockholder of GM through a restructuring plan submitted to the Obama administration by General Motors.

A day after being tapped to receive $5 billion more in bailout funds, GM is going to default on its loans from creditors. It will not be making a $1 billion loan payment due on June 1, which could mean GM is heading for bankruptcy court.

Not surprisingly (as banks hold many GM loans), financial stocks fell on the news.

GM could receive $5 billion more in government loans, and Chrysler $500 million, according to a report filed Tuesday by the federal government.

The government’s inspector general in charge of the auto bailout programs filed the report, which gives GM until June 1 to meet government-mandated conditions (Chrysler only has until April 30).

Sources revealed to the Wall Street Journal that representatives of 200,000 salaried white-collar retirees have been asked to meet with the auto task force later this week.

The retirees want to keep their benefits despite the car companies’ massive restructuring plans and possible bankruptcies. Salaried retirees are not covered by union contracts and are therefore more vulnerable during restructuring. The retirees are from GM, Chrysler, Ford and Delphi, the auto parts maker.

“Some people think that we’re the fat cat execs. That’s not true at all.” — said Chuck Austin, president of the National Chrysler Retirement Organization and an engineer who retired after 40 years.

Delphi has been in bankruptcy for three years and has already cut retirees’ health care coverage this year. White collar retirees include those in sales, marketing, administration, and others in middle management.

Foreign Policy points out that President Obama has appointed not only more czars than any other US President– he’s topped the Russian Romanovs themselves, who had 18 czars over a period of generations. Obama’s czars include ones for not just drugs but terrorism, the border, TARP, urban issues, faith issues, the stimulus, energy, health care, regulations, nuclear non-proliferation, technology, and closing Guantanamo Bay.

Of course, after much talk of a “car czar” and then much talk about there being no car czar, Obama appointed Steven Rattner to what basically amounts to a “car czar” position anyway. So, for our purposes we’ll count Rattner as a czar, too.

New GM CEO Fritz Henderson said Friday that while he would prefer other options, bankruptcy is a more probable outcome of ongoing negotiations with the Obama administration over GM’s future profitability.

“I felt several weeks ago that it would be more probable that we would need to go through a bankruptcy process. I certainly feel that way. That continues today.” — Fritz Henderson, GM CEO

Henderson provided the insight into GM’s line of thinking as the first in what he promised would be a series of open dialogues ahead of the deadline looming at the end of May for GM to develop its final profitability plans. He reiterated GM’s commitment to its “four core brands”- Chevrolet, Cadillac, GMC and Buick- while keeping Pontiac as a “niche” brand. GM has already given the axe to Saturn, Saab and Hummer, and rumors abound that President Obama’s auto task force has further pressured GM to relieve itself of Pontiac and GMC. Henderson revealed that GM has received at least six offers for its European Opel brand, which it is also looking to offload during restructuring.

Henderson dismissed as “premature” reports that GM had been pre-approved for another $5 billion line of government credit in addition to the $13.4 billion it has already signed out from the taxpayers. He did say that $5 billion would be consistent with what GM had requested in February.

Henderson also gave an update on ongoing concessions talks with unions and bondholders, with which there is no agreement yet. Henderson said that concessions reached before February were made irrelevant when the Obama auto task force recommended “deeper and faster” cuts to achieve profitability.

Henderson likened the discussions with federal officials as similar to the private equity due diligence process. He became GM CEO when the Obama administration urged the firing of Henderson’s mentor Rick Wagoner from the GM CEO position.

News arose on Friday that Steven Rattner, head of President Obama’s auto task force, is being investigated by the state of New York for links to a pay-to-play scandal involving possible kickbacks in exchange for access to the state’s pension fund.

The investigation has been conducted for two years by New York Attorney General Andrew Cuomo and the federal government’s Securities and Exchange Commission. The charges center on millions of dollars in fees paid by a private equity group headed by Rattner to a “middleman” group which provided access to the $122 billion New York state pension fund for Rattner’s group. While the payments themselves are not illegal, guaranteeing access to the pension fund in exchange for payments would be illegal.

Two New York state officials, Alan Havesi and David Loglisci, have been indicted on 123 criminal counts related to the investigation. Insiders claim that Rattner met with Loglisci about the investments with the pension fund.

A Treasury Department spokeswoman announced that Rattner informed the department of the pending investigation during the run-up to his appointment as head of the autos task force. The Treasury is in charge of the task force, charged with bringing GM and Chrysler back to profitability.

Rattner’s Background

Rattner spent years as an investment banker with Lehman Brothers, Morgan Stanley and Lazard Freres & Co. (where he occupied the #2 position at one point), before starting investment fund Quadrangle Group in 2000. Early in 2009, President Barack Obama appointed Rattner as head of the 24-member-strong auto task force to bring the auto industry back to profitability.

GM’s new CEO estimated today that more plant closings would be in store for the car company. The closings will be announced in the next few months.

CNBC’s auto reporter Phil Lebeau broke the news, along with the proposed sale price for the Hummer line: $150 million, very low for a line of autos.

Shikha Dalmia of Forbes writes that GM “should run–not walk–to bankruptcy court. That may be the company’s only chance to free itself from the triple-vise of unions, creditors and now President Barack Obama–who is by no means the least life-threatening of the lot.”