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.”

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

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).

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.

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.

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.

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.

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.