NEW YORK — 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,” said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.
Analysts have said all other negotiations hang on that deal. But 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, the newspaper reported.
UAW representatives could not be reached for comment late Thursday.
"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,” Chrysler spokeswoman Shawn Morgan said in an e-mail.
Debate moves on
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 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.
What Fiat is saying
One issue is whether Fiat will put 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 technology and new markets for Chrysler.
by the associated press
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,” said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.
Analysts have said all other negotiations hang on that deal. But 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, the newspaper reported.
UAW representatives could not be reached for comment late Thursday.
"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,” Chrysler spokeswoman Shawn Morgan said in an e-mail.
Debate moves on
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 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.
What Fiat is saying
One issue is whether Fiat will put 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 technology and new markets for Chrysler.
by the associated press
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