Ailing US auto giant Chrysler is to file for bankruptcy protection, unable to complete its out-of-court restructuring, a White House official said yesterday.
The official said US President Barack Obama would make a statement on the auto industry at midday.
A bankruptcy filing would place the struggling number three automaker in the hands of a bankruptcy judge, although the company would likely get further government aid to restructure its operations.
PHOTO: REUTERS
The Obama administration, which has given Chrysler and its larger rival General Motors emergency loans, is also expected to help broker a deal that would give Italian maker Fiat a stake in Chrysler in exchange for small-car technology.
Even as auto workers voted on a new contract offering big concessions in exchange for Chrysler stock, the Wall Street Journal reported that a large number of the company’s 46 creditors voted against a deal that would give them US$2.5 billion in return for forgiveness of US$6.9 billion in Chrysler debt.
The Treasury had sweetened the deal with an increase of US$250 million over a previous cash offer that had been accepted by Chrysler’s major creditors, but not by all holders of Chrysler’s secured debt, the report said.
Obama suggested in a televised news conference earlier on Wednesday that even if Chrysler were forced into the bankruptcy courts, a quick restructuring could be achieved.
“I am actually very hopeful, more hopeful than I was 30 days ago, that we can see a resolution that maintains a viable Chrysler auto company,” Obama said.
The details of a marriage between Chrysler and Fiat “have not yet been finalized, so I don’t want to jump the gun,” Obama said at the White House news conference to mark his first 100 days in office.
“But I am feeling more optimistic than I was about the possibilities of that getting done,” he said.
Under a preliminary deal signed in January, Fiat would initially take a 20 percent stake which would then rise to 35 percent and could eventually reach 51 percent.
Fiat would pay nothing, but would provide access for Chrysler to its technology, notably for smaller, more economical vehicles.
In Milan, Italy, a report said that Chrysler and Fiat had signed a definitive alliance.
A Fiat spokesman would not confirm the report, saying he did “not know” who may have been the source of the information.
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