Fiat reported near deal with Chrysler
DETROIT - Italian automaker Fiat Group SpA will sign a partnership agreement with Chrysler LLC by today as negotiations continue to keep the struggling automaker alive without filing for bankruptcy protection, according to three people briefed on the deal.
One thing is certain: Chrysler will not be sold off in pieces, according to another person briefed on the fast-moving talks.
The Fiat partnership is the last piece of a huge restructuring plan needed for Chrysler to continue operations as it approaches today's government deadline to cut labor costs, slash debt, and take on a partner.
But it was unclear yesterday whether the struggling Auburn Hills, Mich., automaker will be able to stay out of Bankruptcy Court. That, according to the people, hinges on whether a group of hedge funds that hold 30 percent of its debt agree to forgive most of what they're owed.
Late yesterday, the government added $250 million to its offer that would give Chrysler's lenders $2 billion to erase $6.9 billion in secured debt, one of the people said. Four large banks that control 70 percent of the debt already agreed to the deal, but at least some of 46 hedge funds were holding out. The creditors were to vote on the new offer by 6 p.m. yesterday, but the results were unknown.
If they did not agree, Chrysler would file for Chapter 11 bankruptcy protection and enter a short period of restructuring. If they did agree, the company would be able to restructure out of court. In both cases, Fiat would be a partner and the government would finance the restructuring rather than cut off Chrysler's aid, the people said.
"Chrysler will survive and avoid liquidation. Whether that happens in or out of bankruptcy remains uncertain at this point," said one of the people.
All of the people spoke on condition of anonymity because the partnership agreement had not been announced. President Obama may hold an event at the White House today, should a deal be ready to announce.
One of the people said Fiat initially would take a 20 percent stake in the company in exchange for its small-car and engine technology. Initially, Fiat would not invest any cash, but its technology is worth $8 billion to $10 billion, the person said.
Fiat's stake could rise to 35 percent, and the company may be willing to invest money at a later date, the person said.
Obama, speaking in St. Louis, said earlier yesterday that he did not know whether a deal to save Chrysler would be completed.
"We're hoping that you can get a merger where the taxpayers will put in some money to sweeten the deal but, ultimately, the goal is we get out of the business of building cars, and Chrysler goes and starts creating the cars that consumers want," he said.
Fiat spokesman Gualberto Ranieri declined to comment.