White House confirms Chrysler will file for bankruptcy

[Sprint XR8]

Chrysler will declare itself bankrutpt today, White House officials said, after last minute talks with the carmaker’s smaller lenders broke down late last night.

President Barack Obama, accompanied by members of his car taskforce, will make a statement on the issue at noon today.

White House officials said that the carmaker had the full support of its stakeholders, including its largest lenders and union.

An administration official accused Chrysler's smaller lenders of "failing to act in either their own economic interest or the national interest" but added that Chrysler now had an opportunity to restructure and "emerge stronger going forward".

"After a month of tireless negotiations, the Administration went into yesterday afternoon with the full support of Chrysler's key stakeholders, including the UAW and the largest creditors. That support remains."

The bankruptcy filing comes after talks failed with the smaller lenders that hold a portion of Chrysler's $6.9 billion debt who refused to write off their share of the borrowing.

Chrysler had offered $2 billion in cash in return for the debt being written off, which was accepted by the four largest lenders — JP Morgan Chase, Citigroup, Morgan Stanley and Goldman Sachs.

The US Treasury last night sweetened the offer to $2.25 million but smaller lenders, including a number of hedge funds, refused the offer.

The Treasury has prepared for Chrysler to enter a brief “surgical” bankruptcy that avoids liquidating the company. Chrysler's tie-up with Fiat, the Italian carmaker, is expected to go ahead and could be approved as early as next week. A quick bankruptcy would allow Fiat to pick and choose the assets it wanted from Chrysler without taking on some of the company's liabilities and underperforming businesses.

Under a deal signed in January, Fiat would first take a 20 per cent stake which would then rise eventually to 51 per cent.

It would pay nothing, but would provide access for Chrysler to its technology, particularly for smaller, more efficient vehicles.

A bankruptcy for Chrysler could be a prelude to a similar fate for General Motors (GM), its larger rival, which is also struggling in the face of the steepest economic downturn in decades.
http://business.timesonline.co.uk/to...cle6199335.ece