Uncle Sam in GM Driver's Seat

Updated from 5:31 a.m. EDT

That joke about General Motors(GM) becoming "Government Motors" grew closer to reality Tuesday.

The government could emerge as owner of nearly 70% of the new GM if a tentative deal between the automaker and the United Auto Workers is ratified by union members. That deal provides that the union would own up to 20% of the company, instead of the 39% proposed in the company's most-recent restructuring plan.

The government had been slated to take 50%, with unsecured bondholders getting 10% and equity holders getting 1%, under the revised restructuring plan that GM unveiled last month.

Even if GM seeks bankruptcy court protection, which is considered likely, it would present its proposed plan of reorganization to the judge, with the expectation that the plan would be approved.

Given its larger ownership stake, the government could offer a bigger percentage of the company to the unsecured bondholders, who had been offered 10% in return for $27 billion in unsecured debt. In response, a group of large bondholders with about 20% of the $27 billion had proposed that the share be 58%.

Standard & Poor's equity analyst Efraim Levy says he does not believe a bit more stock would convince bondholders to go along with GM's plan. "I haven't excluded it, but I don't think it's likely," he says. "There's not enough time to respond to that change in an offer, and I don't think there would be enough shares offered to make a difference."