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.”