GM will slash dealers, 21,000 factory jobs, Pontiac brand

DETROIT -- If the government signs on to General Motors' new debt-reduction plan, it would become the automaker's second-largest shareholder, behind the United Auto Workers union.

The plan was rolled out Monday as part of new cost-cutting measures that include killing the Pontiac brand and closing several plants, cutting 42% of GM dealers, and stopping production of Saturn and Hummer vehicles by the end of this year.

The changes will make GM smaller, says CEO Fritz Henderson, but he's OK with that.

"I'm more focused on getting results than being big," he says.

Having the government as the company's largest shareholder is just a matter of life these days, Henderson says.

"I'm a believer in dealing with reality," he said at a press conference announcing the latest plan. "What we need to do is create a balance sheet that can support our recovery."

The U.S. Treasury, so far, has been acting more like "a private equity investor that has put a lot in our wagon," Henderson says, rather than a government trying to run an automaker.

General Motors proposes to cut 21,000 U.S. factory jobs by next year, phase out its storied Pontiac brand by 2010 at the latest and ask the government to take company stock in exchange for half GM's government debt as part of a major restructuring needed to get more government aid.

The company also said it plans to slash its dealership ranks 42% from 2008 to 2010, from 6,246 to 3,605.

The struggling automaker also says it will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of debt-for-equity swap.

GM is living on $15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn't satisfy the government, the company could file for bankruptcy protection.

GM will ask the government to take 50% of its common stock in exchange for canceling half the government loans to the company as of June 1.

GM said the proposed exchange with bondholders would wipe away $27 billion in unsecured debt if successful. The company estimates that after the exchange, bondholders would own 10% of the company.