US giant expected to file for Chapter 11 bankruptcy protection later today
30 April 2009

The immediate future of Chrysler is expected to be revealed later today.

Reports suggest that US president Barack Obama will push for the company to file for Chapter 11 bankruptcy protection rather than continuing to give government cash bailouts, giving the company time and space to forge an alliance with Fiat.

"It would be a very quick type of bankruptcy, and they could continue operating and emerge on the other side in a much stronger position," Obama said.

"I don't think there should be a stream of subsidies to automakers, but helping them to restructure now, when sales have collapsed, is realistic," Obama said.

Chrysler’s best assets would be sold to a new entity that would have an ownership structure agreed with Fiat. Chrysler's debtors would be given US Treasury compensation, although the offer is said to be $2.25 billion to wipe out $6.9 billion in secured debt.

Chrysler CEO Robert Nardelli sent a memo to employees yesterday, saying the company is waiting to hear whether its 46 lenders will agree to this.

Insiders say Fiat would then become a 20 per cent owner of Chrysler, and a union retiree health-care trust fund would hold 55 per cent, with the rest of the company staying in the government's hands.

Fiat and the new board of directors of the company would pick a chief executive officer and chairman. Fiat’s chief, Sergio Marchionne, has already said he would be willing to run Chrysler if asked.

This week Chrysler has made progress in its out-of-court restructuring, including reaching cost-saving labor deals with the United Auto Workers union and Canadian Auto Workers. The CAW ratified its contract over the weekend; UAW members approved the deal yesterday. However, it now seems unlikely that this is enough to save it from filing for Chapter 11 bankruptcy protection later today.

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