GM steers toward bankruptcy

General Motors (GM, news, msgs) is in the spotlight again today.

GM bondholders, who hold $27 billion in unsecured debt from the company, rejected a debt-for-stock exchange, putting the automaker a step closer to bankruptcy.

The automaker needed more than 90% of the bondholders to agree to an exchange in which they would swap $1,000 of the debt for 225 shares of the company, getting a 10% stake in a reorganized GM. But the deal was accepted by "substantially less than the amount required," GM said.

GM said that any accepted offers will be returned to bondholders unconsummated.

GM shares fell 17.4% to $1.19 this afternoon. The percentage loss was the largest among the 30 Dow stocks.

The automaker now only has three business days before the government-imposed deadline to get its bondholders to agree to a deal, but that doesn't seem likely.

GM needed concessions from them, as well as from the United Auto Workers union, as a condition of the $19.4 billion in federal loans the automaker has received since December.

Earlier on Tuesday, members of the UAW agreed to take a smaller 17.5% stake in a reorganized company. The Treasury Department is reportedly going to back GM with $50 billion to help finance the company's restructuring, but the government could demand up to 70% of GM stock in exchange.

• A silver lining in GM's demise

Observers had expected the union to end up controlling 39% of the automaker, with the government controlling 50% of the company.

A GM bankruptcy would be the largest industrial bankruptcy in U.S. history.

In related news, Chrysler hopes to emerge from bankruptcy as early as next week, according to published reports.