April 24, 2009

Report: Chrysler to soon file bankruptcy

U.S. automaker Chrysler LLC will declare bankruptcy as soon as next week, sources told The Wall Street Journal.

Chrysler will do so whether or not it reaches an alliance deal with Fiat SpA, the sources said.

Citing several people familiar with the matter, the Journal reported Friday that Chrysler will file for Chapter 11 bankruptcy protection even if it succeeds in reaching a restructuring agreement with its lenders and will receive bankruptcy financing from the U.S. government.

A bankruptcy scenario will allow Fiat to choose which parts of the ailing automaker it wants to own and would also result in the United Auto Workers union owning a large portion of the restructured company's stock, the newspaper said.

The New York Times reported the U.S. Treasury, which had offered $4 billion in new financing if Chrysler could reach a deal with creditors by April 30, has instead reached a deal with UAW members to protect their pensions and retiree health benefits under a bankruptcy filing. The company's debtholders had reportedly been balking at restructuring terms favored by the government.

The alternative to an orderly bankruptcy would be liquidation, in which Chrysler's assets could be split up and sold to separate buyers or shut down completely, the Journal said.