DETROIT — General Motors bondholders felt they deserved something like a 58 percent stake in the company in exchange for their billions of dollars in debt. What they were offered wasn't even close.
As a result, the largest industrial bankruptcy in U.S. history — and fourth largest overall — is now all but certain. GM almost certainly will file for Chapter 11 protection within days.
"They said no. That's it. They tried. That's why they're going to have to file," said John Pottow, a professor at the University of Michigan who specializes in bankruptcy.
The government, which has already extended nearly $20 billion in loans to GM, ordered the company to come up with a plan that 90 percent of its bondholders would agree to.
But the government allowed it to offer only 10 percent of the company's stock. GM was forced to withdraw the offer Wednesday after it fell far short.
To avoid bankruptcy, the government had said GM must shed debt, cut labor costs and close plants.
GM bondholders are owed about $27 billion, the largest chunk of GM's roughly $58 billion in debt. They were offered the 10 percent stake to wipe out the debt, well short of the 58 percent they wanted.
Like crosstown rival Chrysler, GM was pulled down by debt, high labor costs and a devastating sales slump.
The government has poured billions into the two companies, fearing the ripple effects of catastrophic job losses might push the economy into a depression.
The two employ more than 140,000 people in the United States, and hundreds of thousands of others rely on the companies, working for parts suppliers, dealerships and other associated businesses.
GM spokesman Tom Wilkinson said company's board would meet later this week to decide its next move.
He would not reveal what percentage of bondholders accepted the debt-for-equity offer, but GM said it was substantially less than needed.
Offering a glimmer of hope that GM might avoid bankruptcy, the United Auto Workers union agreed Tuesday to take only a 20 percent stake in GM, down from the original plan of 39 percent.
Analysts speculated that the move would free up 19 percent of GM's shares to be used elsewhere, perhaps to sweeten the deal for bondholders.
But that never happened, and now the U.S. government, which may have to commit billions more to GM's court-supervised restructuring, stands to become a majority owner.
GM's biggest bondholders, mostly big banks and other institutional investors, opposed the proposed debt swap from the start.
Smaller bondholders — individual investors like retirees and families — have complained about the terms, too.
Some analysts said GM's bondholders may be holding out for better terms in bankruptcy, where they would normally get up to 40 percent of their holdings back.
Meanwhile, Germany pressed for an independent future for General Motors Corp.'s Europe-based Opel unit.
The foreign minister said "the lights must not go out" on Opel even as the parent company heads for bankruptcy.
Opel's supervisory board approved a plan to pool GM's European assets — including plants, sales operations and patents but excluding Sweden's Saab brand — for a new investor said Karin Kirchner, a spokeswoman for GM Europe.