Chrysler reaches deal, bankruptcy still a possibility

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Chrysler reaches deal, bankruptcy still a possibility
Article from: Reuters


April 29, 2009 11:19am

CHRYSLER LLC's biggest lenders and the US Government reached a breakthrough framework deal to cut the automakers' debt by $US6.9 billion ($9.7 billion), but bankruptcy still loomed as a strong possibility to complete restructuring, officials said on Tuesday.

Although Chrysler allies were buoyed by the development, the near-term future of the American icon hinged on several parts coming together, before tomorrow's US Government deadline, to prove that the company can be viable again.

"We don't want to prejudge the outcome. There is still someway to go in the negotiations, so I would not rule anything in or out," White House spokesman Robert Gibbs said after the administration confirmed the deal with most of Chrysler's primary debtholders.

Chrysler employs more than 40,000 factory and salaried employees. The company has been racing to overhaul its cost structure and secure the lone option the Obama administration believes is workable - an alliance with Italy's Fiat SpA.

Fiat's Chief Executive Sergio Marchionne was quoted by the president of the Canadian Auto Workers (CAW) late yesterday as saying that Chrysler would likely enter Chapter 11 bankruptcy for a period.

"There's still a lot of work that needs to be done," the CAW's Ken Lewenza paraphrased Marchionne as saying.

US officials, including Sen. Carl Levin of Michigan, that a bankruptcy filing, if needed, would be launched with survival in mind.

"If they do go into bankruptcy, it would really be in and out," Levin said in Washington.

One source with senior-level knowledge of the Chrysler restructuring said that a surgical bankruptcy could be a way, for instance, to address any "recalcitrant" lenders.