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Sat, Apr 25, 2009 - Page 10 News List

Chrysler readies bankruptcy plan

BACK UP PLAN: Facing an April 30 deadline to close a deal with Fiat, the troubled automaker said it was preparing for bankruptcy as a contingency measure

REUTERS , WASHINGTON AND NEW YORK

With a week remaining for Chrysler LLC to clinch a deal with Italy’s Fiat, the US automaker is readying a bankruptcy plan but still focused on reaching an alliance with the support of the administration of US President Barack Obama, people with knowledge of the discussions said on Thursday.

Fiat, meanwhile, also emerged as a potential buyer for General Motors Corp’s (GM) Opel unit in a deal that would mark the Italian automaker’s emergence as a major global player with a role in the restructuring of two of Detroit’s sputtering carmakers.

Chrysler, which faces a government-imposed April 30 deadline to cement an alliance with Italy’s Fiat or face a cut off of its federal funding that could trigger its liquidation in bankruptcy, has been preparing for a Chapter 11 filing as a contingency, a person with direct knowledge of the plans said.

A US official said the focus for the automaker’s task force headed by former investment banker Steve Rattner was for brokering a Chrysler-Fiat deal even as it prepared for the alternative.

“In a negotiation like this, everything is speculation until there’s a deal,” the official said.

Separately, the head of the Canadian Auto Workers union said on Thursday he expected to have a cost-saving deal completed with Chrysler by yesterday morning.

Canada is also considering providing financing to both Chrysler and GM if the companies end up filing for bankruptcy, Industry Minister Tony Clement said.

GM said on Thursday it would slash production over the next three months.

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