Chrysler Near Deadline to Restructure

NEW YORK (AP) - With a government deadline just seven days away,
Chrysler LLC is running out of time to work out deals with
debtholders, its unions and a foreign partner.

A life outside of bankruptcy appears to hinge on whether
Chrysler and the U.S. government can get the company's lenders to
forgive a large portion of the company's debt in exchange for
stock. But both sides are far apart.

"I've said this is the equivalent of a 70-yard field goal,"
Michael Robinet, vice president of global vehicle forecasts at CSM
Worldwide, said of Chrysler meeting all its obligations in the next
seven days.

Analysts have said all other negotiations hang on that deal.
However, The New York Times reported Thursday that the Treasury
Department is preparing a Chapter 11 bankruptcy filing for
Chrysler, under which the pensions and retiree health care benefits
of the United Auto Workers union would be protected. The company
would pursue a deal with Italian automaker Fiat SpA while under
bankruptcy protection. The lender issue remains unresolved,
according to the newspaper.

UAW representatives could not be reached for comment late
Thursday.

Chrysler spokeswoman Shawn Morgan said in an e-mail that "it's
important to keep all options open.

"Chrysler will continue to work through the end of the month,
based on the direction given by the Presidential auto task force,
to secure the support of the necessary stakeholders and reach a
successful conclusion that the administration and U.S. Treasury
deems appropriate," Morgan said.

Chrysler's secured lenders consist of large and small banks and
hedge funds that have poured about $6.9 billion into the Auburn
Hills, Mich., company. These lenders - about 45 - would be first in
line to get paid if the company's assets were liquidated.

Chrysler has been living on $4 billion in government aid since
the beginning of the year. The Obama administration has offered
another $500 million in working capital to get through April 30,
when it has said it would cut off aid.

Including the secured debt and government loans, Chrysler owes
about $23.5 billion, including $10.6 billion to a union trust fund
that will take over retiree health care costs starting next year.
It also owes $1 billion each to its owners, Cerberus Capital
Management LP and Daimler AG.

The company is negotiating with the UAW to take equity for part
of the trust fund obligation, as well as other concessions.

In Canada, Chrysler was making progress in reaching a new labor
agreement with the Canadian Auto Workers union. The country's
economic development minister said a new deal could come as close
as Thursday, according to the Canadian Press.

The Treasury and Chrysler's lenders spent the week lobbing
proposals back and forth. Earlier this week, representatives of
Chrysler's debtholders offered to forgive $2.5 billion of the $6.9
billion they are owed, according to people familiar with the
discussion. In exchange, they offered to take a 40 percent equity
stake in an alliance between Chrysler and Fiat SpA.

The creditors also wanted to be able to elect a board member to
the alliance and asked for Fiat to put up $1 billion in cash.

The Treasury swiftly rejected the terms. On Tuesday, the
government offered a 5 percent stake in the company in exchange for
lenders forgiving a much larger $5.4 billion - or 78 percent - of
Chrysler's debt.

Even if Chrysler gets a debtholder deal, CSM's Robinet points
out the company faces four other "tremendous hurdles" to
surmount: the tie-up with Fiat, a new deal with the UAW, proving
the viability of Chrysler Financial and proving it won't need more
government aid after the April 30 deadline.

One issue in the debtholder negotiations is whether Fiat will
put any cash into the potential alliance. Chrysler's lenders want
Fiat to kick in money, said a person familiar with the matter. The
person declined to be named because the negotiations remain
private.

Fiat, for its part, isn't budging. Chief Executive Sergio
Marchionne said Thursday the company still has an "unwavering
commitment" to a deal with Chrysler, but said it brings enough to
the table, such as new technology, new small-vehicle platforms and
new markets for Chrysler products. He added that raising cash in
today's market is too difficult.

"I don't know why we would have to pay to get in," Marchionne
told investors during a conference call from Turin, Italy. "We
have spent a long time talking to people both in the Treasury and
with Chrysler ... to explain the value of what we're bringing."

Michigan Sen. Debbie Stabenow on Thursday sent letters to
Chrysler's lenders urging them to come to an equitable deal and
keep Chrysler out of bankruptcy.

"Hundreds of thousands of American families are waiting
anxiously as Chrysler approaches its deadline," Stabenow said.

Even with all the other obstacles, Robinet called the logjam
between Chrysler and its lenders "a show-stopper."

He estimates that Chrysler has a roughly 65-percent chance of
failing and winding up in bankruptcy proceedings of some sort.

Robinet said whatever happens, Chrysler is sure to be a very
different company.

"Whatever emerges after some sort of restructuring ... will
definitely not be the exact same company that went in, for sure,"
he said.


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