General Motors Corp on Monday launched a last-ditch bond exchange offer to avoid bankruptcy and planned to cut 21,000 U.S. hourly jobs in a new restructuring that would see the automaker nationalized under majority control by the U.S. government.

GM Chief Executive Fritz Henderson said the automaker would file for bankruptcy protection if an offer to exchange bonds for company equity failed to cut $27 billion in bond debt by about 90 percent or other changes faltered.

But analysts doubted the debt exchange offer would succeed, setting up GM to restructure under bankruptcy protection.

Just how the U.S. government might treat a majority ownership of GM, the largest U.S. automaker, also was unclear.

The White House said on Monday the U.S. government had no desire to run a domestic automaker despite the potential controlling interest.

We strongly back an auto industry that we believe can and should be self reliant, White House spokesman Robert Gibbs told reporters. It is not our desire to either own or run one of the auto companies.

Separately, Chrysler lenders were expected to receive a new offer from the U.S. Treasury as early as Monday in the wake of cost-cutting deals the U.S. automaker has reached with unions in the United States and Canada.

Chrysler faces an April 30 deadline to reach a deal with creditors and cement an alliance with Italy's Fiat SpA and continue to receive U.S. government emergency support.

The automaker was working diligently to complete the Fiat deal and restructure its business by the deadline and maintain government emergency loans, Chief Executive Bob Nardelli said in a memo to staff on Monday obtained by Reuters.

Chrysler's owner, Cerberus Capital Management LP, also has been working with Daimler AG on the German automaker's divestiture of the 19.9 percent Chrysler stake that it has maintained since selling the company in 2007.

Both GM and Chrysler face the specter of bankruptcy if they fail to cut their debt significantly.

Canadian Industry Minister Tony Clement said on Monday it was now more likely Chrysler would not have to go into liquidation following an agreement with the Canadian Auto Workers union that Fiat has concluded is cost-effective.

SIXTY-DAY GM BANKRUPTCY POSSIBLE

GM's new offer to bondholders would leave them with a 10 percent ownership of the restructured automaker, a sharply lower payout than U.S. officials were offering the United Auto Workers union.

The offer is unlikely to be accepted by bondholders, who are in effect being asked to sacrifice most of their claims in order to help GM satisfy commitments to the UAW, Barclays Capital analyst Brian Johnson said.

KDP Investment Advisors Inc analyst Kip Penniman viewed the situation the same way.

The company is almost certain to miss that deadline, he said.

Henderson, GM's CEO, told reporters that it was possible for GM to complete the bankruptcy process within a 60-day period, but called the success of the bond exchange critical for the automaker to stay out of court.

The bond exchange needs to be successful for us to avoid bankruptcy, Henderson said. It's not impossible, but bankruptcy is now more probable.

The new GM that would emerge from the restructuring would be 89 percent-owned by the U.S. government and the UAW, provided that workers and officials approve plans to take an ownership stake in exchange for debt.

Under the terms of the exchange, the bondholders would have up to 10 percent of GM common stock, a level dictated by the U.S. Treasury. Current stockholders would have 1 percent.

I'm not going to get into what's fair, Henderson said. That's for individual bondholders to determine.

GM shares closed nearly 21 percent higher at $2.04. GM bonds also moved higher.

Still, Standard & Poor's equity analyst Efraim Levy maintained a sell rating on GM shares.

Whether there is a bankruptcy filing or not, we see it as lose-lose for shareholders via dilution from equity issuance or loss of value via a filing, Levy said.

GM Canada also announced further restructuring and said it expected to complete an agreement with the government of Canada and the province of Ontario to access short-term bridge loans of up to C$3 billion ($2.5 billion).

Responding to criticism that its prior turnaround plans had been too slow-moving, GM also outlined deep cuts by the end of 2010: reducing the number of U.S. plants to 34 from 47, slashing the U.S. hourly workforce by about 21,000 to a total of 40,000 positions, and cutting its dealer network to 3,605 from 6,246 stores.

The Obama administration's autos task force, which has been overseeing GM's planning for the past month, said the steps showed the automaker was making progress toward viability.

Today's bond exchange filing represents an important step in GM's effort to restructure, the task force, headed by former investment banker Steve Rattner, said in a statement.

DIGGING DEEPER

GM, which last week took $2 billion of emergency U.S. government loans to bring its total to $15.4 billion so far, was told by the Obama administration in late March it had until June 1 to dig deeper and move faster for continued support.

The automaker said it would phase out the Pontiac brand by the end of next year and could stop production of its Saturn models by the end of 2009. A sale of the Hummer SUV brand is still a reasonable likelihood, Henderson said.

The steps would leave GM, formerly the world's largest automaker, with four core brands -- Chevrolet, Cadillac, Buick and GMC -- and a network of international alliances as its European unit Opel is sold to a new investor.

GM expects to break even with the U.S. auto market at annual sales near 10 million units after the cuts. That would allow it to begin generating cash as soon as next year if the U.S. market sees an even modest recovery, Henderson said.

GM hopes to cut $44 billion of debt through the bond exchange and by paying off half of the $20 billion it owes the UAW for a healthcare trust with an equity stake of nearly 40 percent of the restructured company.

The U.S. Treasury would convert about $10 billion of the emergency funding it has provided GM since the start of the year in exchange for a stake of more than 50 percent.

GM said it would close or idle six additional North American plants from the mid-February plan that was rejected by the Obama administration. The automaker has 47 assembly, powertrain and stamping plants in the United States.

The automaker's cuts in hourly workers represent an additional 7,000 to 8,000 from the earlier plan and the dealer reductions represent an additional 500 dealers coming four years earlier than its previous plan.

(Reporting by David Bailey, Kevin Krolicki, Soyoung Kim and Poornima Gupta, Nick Carey, John McCrank, John Parry and Caren Bohan; editing by Dave Zimmerman, Matthew Lewis and Carol Bishopric)

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