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.

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.”

While the government and new GM CEO Fritz Henderson hinted that bankruptcy might be a possibility for the American car company, bankruptcy experts disagreed that a bankruptcy, even a quick one, could bring GM to profitability.

If customers are scared away by a bankrtupcy, GM would have little hope of survival. A bankruptcy judge could rid GM of many of its most pressing problems, including crippling debt and union contracts, but it could not force Americans to buy GM’s cars. Obama has said that the federal government would finance a bankruptcy and back the carmaker’s manufacturer’s warranties.

“If you buy a car from Chrysler or General Motors you will be able to get your car serviced and repaired, just like always. Your warranty will be safe.” — President Obama

GM is now on a 60-day deadline to restructure its debt or face bankruptcy. The odds for success aren’t good: 90% of companies that enter Chapter 11 bankruptcy fail within three to five years.

The Obama administration, as part of its oversight of GM due to the company’s $13.4 billion bailout taken in December, has asked and received the resignation of the company’s CEO Rick Wagoner. Forbes terms the move “Orwellian.” Forbes mentions that Ford Motor Co. is no doubt delighted that they did not go down the road of a bailout, thus dodging a possible CEO replacement of their own.

After nine years as CEO and all of his career spent at GM, Wagoner was certainly in the wrong place at the wrong time, with higher oil prices bringing the death of SUVs and trucks, and foreign companies bringing in more competition and innovation.

CNN outlines four ways Detroit can be fixed, all at a high cost. CNN estimates the final price tag for a simple bailout could top out at $130 billion for the federal government. In addition to the $39 billion GM and Chrysler have requested, parts dealers and suppliers have asked for bailouts, and consumers may be lured into buying Detroit’s products with tax credits and other incentives that could cost the government billions more.

Auto parts suppliers want $18.5 billion in guarantees for loans owed to them by GM and Chrysler. Auto dealers want $5 billion to $20 billion in loan guarantees so that they can finance their inventories. While Ford has said it doesn’t need federal help right now, it initially asked in December for $9 billion in loans and could re-submit the request.

Finally, the “Cash for Clunkers” tax credit, in which owners of inefficient vehicles more than 10 years old would receive a $10,000 tax credit for buying new efficient vehicles, is still floating around Congress is various guises after being stripped out of the stimulus package. The estimated cost to taxpayers is about $16 billion for the tax credit. Sen. Barbara Mikulski of Maryland has trumpeted a proposal to allow car buyers to deduct interest from their auto loans on their taxes, which was also taken out of the stimulus bill in favor of a deduction for sales taxes on new car purchases. The auto industry has heavily backed these bills, believing that they would stimulate demand for new cars.

GM and Chrysler have made dire predictions for what might happen if they go into bankruptcy. They said that if they were unable to find loans or the government did not lend to them, the move could cost the federal government hundreds of billions of dollars in lost tax revenue. CNN’s xperts agree with this analysis, and say that a bankruptcy of the magnitude of GM’s has not ever occurred before.