Talks aimed at keeping General Motors (GM) out of bankruptcy could go right down to the wire, as the government tries to get bondholders to go along with a plan that would allow the auto maker to survive.

A person familiar with the GM negotiations says that talks with bondholders on the Treasury Department’s proposal to exchange 90% of unsecured GM debt for equity in the auto maker could continue until the Obama Administration’s June 1 deadline for a restructuring deal, despite Tuesday’s midnight deadline for the exchange offer.

“We’ve said consistently we’d be happy to talk to any stakeholder anytime about anything,” the person said.

The person said that there have been “more constructive” conversations with bondholders recently, with bondholders negotiating more as a group rather than individually, which has helped the process. The source said the government had made a “full and fair” proposal to bondholders and that it remains “in a dialogue with them.”

He added that bondholders “would get nothing” or an “unbelievably small” amount if the company went into bankruptcy.

He said that with the requirement of 90% bondholder approval for the debt-to-equity exchange -- a high hurdle from the beginning -- chances of a bankruptcy filing for GM remain “greater now.”

It is “not the preferred option, but it is definitely an option,” he said. “We’re continuing to work on all fronts.”

“We’d like to have ‘peace in the valley,’” he said of trying to reach agreement with the bondholders by May 31.

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The person said bankruptcy would be more complicated for GM than it was for Chrysler, because GM is a public company, with publicly traded debt and equity; it is a larger company; and it is a global company.

“We do expect it to be a more complicated [bankruptcy] process, a longer process,” he said.

Regardless of the outcome of negotiations with bondholders, the Treasury would likely end up owning a large stake in GM, the person suggested.

The Administration is looking at providing another $30 billion to GM, though it’s unclear if this is bankruptcy financing/post-bankruptcy capital, converted debt to equity. The additional $30 billion is about what GM called for in its reorganization plan.

Combined with the $20 billion already loaned, this would take the Treasury commitment to $50 billion.

The Canadian government will participate in the GM restructuring, as it did with Chrysler. The Washington Post reported that Canada will kick in about $9 billion. With the Canadian money, the bailout would be pushing $60 billion.

Obviously, with this much skin in the game, an ownership level of around 70% by one or both governments cannot be ruled out, but the final percentage will depend on any final deal with bondholders.

Additional debt would not help GM become a viable company long term, the person suggested.

“What does that leave? That leaves equity,” the person said.