With less than 24 hours to go US carmaker Chrysler is rushing to seal a deal with Italy’s Fiat and its remaining creditors, to avoid having to file for bankruptcy under US Chapter 11 protection laws.
At the same time the powerful United Auto Workers union has voted overwhelmingly to accept a deal that will make its health fund the major shareholder in any Chrysler-Fiat alliance.
The UAW will effectively control 55 per cent of the shareholding in the Chrysler-Fiat alliance as part of a deal to reorganise half the US$10.6 billion obligation that the carmaker owes a retiree health care trust that the union will administer.
UAW President Ron Gettelfinger said in a statement, “Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve US manufacturing jobs and gives Chrysler a chance to survive.”
“Today’s vote enables us to continue our work to meet the conditions laid out by the US Treasury Department,” Chrysler President Tom LaSorda said in a prepared statement.
Meanwhile, Reuters newsagency said Chrysler was rushing to clinch deals with Fiat SpA and a fractious group of lenders in a last-ditch effort to avoid bankruptcy as the final day began of a government-imposed restructuring deadline.
US President Barack Obama said concessions by Chrysler’s unions and its major bank lenders had made him more hopeful than he had been just a month ago that the struggling automaker could be made viable.
But he added that it was still not clear if Chrysler would need to seek bankruptcy protection to cement concessions from its lenders and move ahead with a planned alliance with Fiat.
“The details have not yet been finalised so I don’t want to jump the gun, but I’m feeling more optimistic than I was about the possibilities about that getting done,” Mr Obama said in a news conference.
The White House has set a series of aggressive targets for Chrysler in order to justify another US$6 billion in investment on top of the US$4 billion in emergency loans that the government has extended since the start of the year.
The number three US carmaker has won cost-cutting concessions from its unions in the United States and Canada and is on the brink of closing its deal with Fiat, a person involved in those negotiations told Reuters.
That leaves the focus on ongoing debt restructuring talks spearheaded by the Obama administration’s automotive task force and former investment banker Steve Rattner.
An Obama administration official said Chrysler talks could run up to the deadline of 11:59 p.m. EDT on Thursday.
Fiat and Chrysler are prepared to complete a merger deal by Thursday that would be taken into bankruptcy court as a key element of the restructuring plan if needed, a person with direct knowledge of the preparations said.