General Motors Corp.'s (GM) small bondholders became the latest group to protest the auto maker's survival plan, gathering Wednesday to speak out against a debt exchange offer that would leave them with just cents on the dollar.

GM has said at least 90% of bondholders must agree to a debt-for-equity swap launched on Monday or else the company will be forced to restructure in bankruptcy court.

While they hold a small share of GM's debt - around one-fifth - relative to larger financial institutions, the strong negative reaction from individual bondholders underscores the challenge GM faces in getting its offer to succeed.

On Wednesday, a group of bondholders gathered the town center of Warren, Mich. to protest GM's plans. Several bondholders shared stories of how they came to own GM bonds. Organizers strove to strike a folksy tone with a guitar singer in the background and signs about saving "Main Street" investors.

"Bonds are a loan, they are not a speculative stock," said Chris Crowe, a retired electrician from Denver who said he'd been relying on GM bonds to send his son to college.

GM is asking bondholders to swap up to $27 billion in unsecured debt for a 10% company stake. If bondholders tender less than 90% of the debt, GM says it is prepared to file for bankruptcy protection.

Under GM's plan, the U.S. government, supporting the auto maker with $15.4 billion in loans, would get half its debt repaid. The United Auto Workers would get 40% of what GM owes for a retiree health care trust.

A group representing bondholders rejected the plan and said it would make a counteroffer.

The small bondholders' move to organize and make a case follows similar attempts by salaried retirees and auto dealers who would also lose big under GM's plan.

GM's current market capitalization of $1.28 billion implies holders of the company's bonds would get around half-a-cent on the dollar - well below the already distressed levels at which the debt trades. Optimistic scenarios put the equity's worth at 8 cents to 10 cents on the dollar.

A bankruptcy filing, however, could be much worse. There are many other claims on the company, and costly and time-consuming litigation could drain even more value.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@dowjones.com.