DETROIT (AP) - Chrysler will take on Fiat as a partner and avoid
death, but whether or not it heads into bankruptcy protection
depends on eleventh-hour negotiations with its creditors that
apparently continued into Thursday, according to people briefed on
President Barack Obama said Wednesday night he is "very
hopeful" that deals can be worked out to keep Chrysler LLC a
viable automaker, and he is more hopeful than he was a month ago
that the company will stay in business.
Also Wednesday, a person briefed on the high-stakes Chrysler
negotiations said the company will not be sold off in pieces but
could still wind up under Chapter 11 bankruptcy protection. A
restructuring out of bankruptcy also is possible, depending on
whether a deal can be reached to reduce Chrysler's $6.9 billion in
The company's fate appeared to be in the hands of about 40 hedge
funds that hold about 30 percent of its debt. Although four banks
that hold 70 percent of the debt have agreed to erase it for $2
billion, the hedge funds were holding out for a better deal.
Obama, though, pointed to movement on the debt and concessions
from labor unions to say that he was optimistic.
"All of that promises the possibility that you can get a
Fiat-Chrysler merger and that you have an ongoing concern," he
said. "The details have not yet been finalized, so I don't know to
jump the gun. But I am feeling more optimistic than I was about the
possibilities of that getting done."
Obama's administration sweetened its offer to the debtholders
Wednesday, adding $250 million with a 6 p.m. deadline. But the
debtholders were discussing counteroffers, said U.S. Rep. Gary
Peters, D-Mich., whose district includes Chrysler's Auburn Hills
"You've got high stakes negotiations going on right here at the
very last hours," he said.
"It's frustrating that these hedge funds continue to push for
every last nickel," Peters said. "Tens of thousands of families'
lives are at stake here."
Three people briefed on the talks said the debt issue will be
settled either in or out of bankruptcy, and the Fiat partnership
would be signed by Thursday as the last piece of a huge
restructuring plan needed for Chrysler to continue operations.
The company, which has borrowed $4 billion from the federal
government and needs billions more, faces a Thursday deadline to
cut labor costs, slash debt and take on a partner if it wants more
If the government can't reach an agreement with all of
Chrysler's debtholders, the company would file for Chapter 11
bankruptcy and enter a short period of restructuring, the people
said. If there is an agreement, the company would be able to
restructure out of court. In both cases, the government would
finance the restructuring, the people said.
"Chrysler will survive and avoid liquidation. Whether that
happens in or out of bankruptcy remains uncertain at this point,"
said another person briefed on the talks. The smaller lenders would
have little power to stop the debt from being restructured in
bankruptcy court, since the lenders holding the majority of the
debt are on board with the plan, the people said.
All of the people spoke on condition of anonymity because the
partnership agreement had not been announced. Obama may hold an
event at the White House on Thursday should a deal be ready to
announce, but nothing has been finalized.
Fiat spokesman Gualberto Ranieri declined to comment on the
Chrysler spokesman Todd Goyer said there's so much speculation
"that it would be inappropriate for us to comment prior to any
The government in March rejected Chrysler's restructuring plan
and gave it 30 days to make another effort, including a tie-up with
On Sunday, the Canadian Auto Workers ratified concessions to the
automaker, and the United Auto Workers in the U.S. reached a
tentative cost-cutting deal that members overwhelmingly ratified
The UAW agreement, which will take effect May 4, meets Treasury
requirements for continued loans to Chrysler Corp., and includes
commitments from Fiat to manufacture a new small car in one of
Chrysler's U.S. facilities and to share key technology with
"This has been a challenging time filled with anxiety and
uncertainty for our membership," said UAW President Ron
Gettelfinger. "Our members have responded by accepting an
agreement that is painful for our active and retired workers, but
which helps preserve U.S. manufacturing jobs and gives Chrysler a
chance to survive."
Chrysler Vice Chairman and President Tom LaSorda said the
company is thankful to UAW members for their support and that the
vote enables Chrysler to continue to work to meet the government's
Chrysler CEO Robert Nardelli said Wednesday in an e-mail to
employees that the automaker was moving toward meeting the
government's restructuring requirements.
"I'm encouraged by this progress and I want you to know I
deeply appreciate the sacrifices made by so many constituents to
help us reach the restructuring targets established by the
government," Nardelli wrote.
The Fiat partnership means Nardelli could be out of a job. In an
April e-mail to employees, he said that if the deal is finalized,
Chrysler would be run by a new board appointed by the government
and Fiat. The new board, Nardelli wrote, would pick a CEO "with
Sergio Marchionne, CEO of the Italian automaker, told reporters
earlier this month that he could run Chrysler. Obama said Wednesday
that Fiat's management "has actually done a good job transforming
The government clearly was trying to pressure the hedge funds as
Chrysler's deadline approached. Its sweetened offer would go back
to $2 billion if not approved by all the lenders.
Michigan Gov. Jennifer Granholm, speaking in Lansing at a news
conference about the swine flu, urged them to consider Chrysler's
"The future of Chrysler is in the hands of some of these hedge
funds that want to hold out for a greater profit," she said. "So
on behalf of Michigan, on behalf of the thousands of people who
will be affected if this company is forced into bankruptcy, I am
publicly asking these hedge funds to not be greedy but to do what
the banks have done and what everyone else around the table has
done - take the concessions," she said.
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