With the deadline for the Fiat- Chrysler merger just a week out and despite Fiat’s insistance that the alliance will happen, the United States Treasury is apparently preparing for a Chapter 11 bankruptcy filing for Chrysler. The filing would allow for Fiat to complete its alliance with Chrysler while the Michigan automaker was under the bankruptcy protection.
On condition of anonymity, sources close to the Treasury told the New York Times that the bankruptcy filing for Chrysler could come as early as next week. According to the sources, the UAW has an agreement in principle with the Treasury that would protect members’ pensions and retiree health care benefits.
Meanwhile, Chrysler ’s lenders are negotiating with the government to reduce the automaker’s debt. Yesterday, the Treasury offered lenders about $0.22 on the dollar per share (for a total of $1.5 billion of the almost $7 billion in outstanding debt), as well as 5 percent of a restructured Chrysler. Reuters reports that the lenders will make a counter offer by tomorrow.
Fiat CEO Sergio Marchionne doesn’t seem detrred, however; earlier today, he told the Wall Street Journal that he was confident his company would seal the proposed deal with Chrysler next week.
Marchionne admitted, for the first time, that Fiat would consider injecting some cash into Chrysler, a move that drew skepticism from analysts concerned about Fiat’s dwindling reserves. Though Fiat has cash on hand, the global downturn in new car sales has seen the automaker’s liquidity shrink along with the rest of the industry.
“In light of what I know today, I see no reason why it won’t happen,” Marchionne told reporters.
Marchionne also denied that Fiat will sign a letter of intent to purchase a majority stake in Opel, though he did confirm that the automakers have been talking to one another about a tie-up. GM has been said to be considering letting a majority share in Opel go for as little as $500 million, though Fiat’s creditors are unlikely to support investments in both Detroit automakers, even if the Chrysler alliance was a no-cash deal.
