General Motors officially said that a crucial bond- exchange proposal failed to gain enough support and that its board of directors would meet to review the carmaker's options, clearing the path for what would be the largest US industrial bankruptcy ever.
GM said in a statement that the exchange offer had fallen far short of its debt-reduction target set in consultation with President Obama’s administration.
The company said in a release that "substantially less" than the 90 per cent threshold had been tendered and none of the exchange offers would be accepted.
The exchange had been seen as GM's last hope to cut debt outside the kind of government-financed bankruptcy that has been underway for its smaller rival Chrysler since the end of April.
The carmaker's board may meet as soon as today to review options, representatives said. The company has been kept in operation since the start of the year with $19.4 billion in emergency federal loans,
GM's bond-exchange offer had been dogged by criticism since it was launched a month ago that it was an unfairly low payout made at the direction of US officials more sympathetic to the competing claims of GM's unionised workers and retirees.
GM shares, which could be worthless if the automaker files for bankruptcy, were down 10 per cent at US$1.29 in premarket trading.
Analysts said GM's bondholders had tipped the company toward a near-certain bankruptcy that would rank as one of the largest and most complex reorganisations in US history.
"The exchange offer was really a transparent attempt to blame bondholders for the bankruptcy rather than to accept responsibility for years of mismanagement and failure to anticipate things that should have been understood," said Richard Tilton, a restructuring analyst at Covenant Review.
Independent auto industry analysts Erich Merkle said: "The task force made that hurdle so high, they wanted them to go into bankruptcy. They see that as the solution."
GM is widely expected to file for bankruptcy by June 1, the deadline set by President Barack Obama for the company to demonstrate its viability or seek refuge in bankruptcy court.
"GM today stands at the very brink of bankruptcy," the United Auto Workers said in a document that detailed terms for the sweeping concession agreement now before rank-and-file members for votes Wednesday and Thursday.
Ratification, which is widely expected, is a priority of the Obama administration's auto task force, which wants GM to sew up big-ticket cost-cutting and other deals and demonstrate stakeholder unity ahead of any Chapter 11 filing.
Any major changes in the ownership structure of a new GM appeared unlikely as the government is ready to increase its planned stake, and its risk, from 50 per cent to as much as 70 per cent in order to further cut the company's debt, the Wall Street Journal said on Tuesday.
The US government has provided a combined US$36.6 billion to GM, bankrupt Chrysler and their financing units since December and has said it stands ready to finance a GM bankruptcy proceeding.
The Journal reported that the Treasury was prepared to sink another US$50 billion into GM through various financings, most of which would take the form of company equity.