Chrysler to file for Chapter 11 bankruptcy protection

CHICAGO, April 30 (Xinhua) -- U.S. automaker Chrysler LLC has to file for Chapter 11 bankruptcy protection after talks between the Treasury Department and the company's creditors collapsed early Thursday morning, according to Detroit local reports.

Talks between the Treasury Department and Chrysler's lenders aimed at keeping the troubled automaker out of bankruptcy collapsed after the Obama administration's automotive task force worked into early morning on Thursday and failed to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler's debt, said people involved in the talks.

J.P. Morgan Chase, which leads the creditor group as Chrysler's largest lender, gave the other 45 banks and hedge funds 90 minutes on Wednesday to vote on the deal. However, many funds voted no and refused to budge, meaning a trip to bankruptcy court is unavoidable for Chrysler by the deadline of Thursday.

No new talks are set for Thursday although Chrysler still has more than a dozen of hours before the 11:59 p.m. deadline to get concessions from its lenders, who had loaned the company 6.9 billion dollars. Chrysler officials had no comments on media's bankruptcy report.

U.S. President Barack Obama is scheduled to discuss the 85-yearold carmaker's future Thursday noon, when he is supposed to ask for the historic bankruptcy of Chrysler and announce a signed deal with Chrysler and Italian automaker Fiat.

Analysts said that the filing for bankruptcy will not mean the halt of operations or liquidation for the iconic old automaker, and it is really another kind of restructuring as the administration expects to use the bankruptcy process to join Chrysler with Fiat.

What's more, the United Auto Workers (UAW) union announced late Wednesday night that its membership at Chrysler had overwhelmingly ratified a concession contract reached between the company and union leadership on Sunday night, which means the way to reach a partnership deal has been paved.

President Obama said during a press conference Wednesday night that he was more confident than he was 30 days ago that Chrysler would be able to emerge from the process as a healthy, competitive company.

It is not the first time for the automaker giant to face bankruptcy. Chrysler narrowly avoided bankruptcy in 1980 after winning 1.5 billion dollars of government loans.

Chrysler was sold for 36 billion dollars to Daimler-Benz in 1998, but the deal ended in 2007, when the German automaker sold Chrysler to Cerberus Capital Management LP for 7 billion dollars.

Although Chrysler avoided collapse last December as the previous Bush administration provided 4 billion dollars as bailout loans, the company's sales fell 30 percent in 2008 -- compared with an industry decline of 18 percent. Chrysler's sales declined 46 percent in the first quarter this year.

CHRYSLER TO FILE FOR BANKRUPTCY, CNN REPORTS

CHRYSLER TO FILE FOR BANKRUPTCY, CNN REPORTS

Chrysler talks break down, bankruptcy looms

Special Report:Global Financial Crisis

A walking stop sign is seen in front of the logo of Chrysler at a car dealership in New York, the United States, April 7, 2009. The U.S. Treasury will provide a further five billion dollars in loans to General Motors and 500 million dollars to Chrysler as the automakers work on their viability plans, officials said Tuesday. (Xinhua/Liu Xin)
Photo Gallery

CHICAGO, April 29 (Xinhua) -- Talks between the U.S.
Treasury Department and Chrysler LLC lenders over the automaker's debt broke off
late Wednesday, leaving bankruptcy the automaker's all but certain option, news
agencies reported.

Chrysler will file for bankruptcy after the talks
broke down, since its 80 percent of stocks are controlled by private-equity firm
Cerberus Capital Management LP, Reuters reported, quoting the Wall Street
Journal.

The Associated Press also reported that the talks
"have disintegrated," citing its own sources.

"After allowing talks to continue late into the night
Wednesday, the Treasury Department finally ended negotiations after the hedge
funds were unable to come to an agreement," the AP report said.

The U.S. government had set an April 30 deadline for
Chrysler to strike a deal with Fiat after concluding that the struggling
automaker would not be viable on its own.

The talks between Chrysler LLC's lenders and the
Treasury Department was aimed at reducing the automaker's 6.9 billion dollars in
secured debt and keep it out of bankruptcy protection.

The breakdown also means further emergency government
aid for Chrysler will be withheld.

style="BORDER-RIGHT: #003399 1px solid; PADDING-RIGHT: 5px; BORDER-TOP: #003399 1px solid; PADDING-LEFT: 2px; FONT-SIZE: 14px; PADDING-BOTTOM: 5px; MARGIN: 10px; BORDER-LEFT: #003399 1px solid; WIDTH: 492px; COLOR: #003399; PADDING-TOP: 5px; BORDER-BOTTOM: #003399 1px solid; HEIGHT: 133px">

style="FONT-WEIGHT: 700; FONT-SIZE: 18px; WIDTH: 128px; COLOR: #003399; LINE-HEIGHT: normal; FONT-STYLE: normal; HEIGHT: 18px; FONT-VARIANT: normal">More
stories

Chrysler, Fiat to sign alliance
deal
U.S. gov't, Chrysler lenders reach
deal
U.S. Treasury to provide further loans to
GM, Chrysler
Chrysler seeks production plant in
China

Chrysler, Fiat to sign alliance deal

CHICAGO, April 29 (Xinhua) -- Italy's Fiat SpA will sign an agreement
Thursday to form an alliance with the U.S. automaker Chrysler LLC, sources
familiar with the negotiations said Wednesday.

The U.S. government had set an April 30 deadline for Chrysler to strike
a deal with Fiat after concluding that the struggling automaker would not
be viable on its own.

Reports: U.S. gov't, Chrysler lenders reach deal

style="BORDER-RIGHT: #cc0000 1px solid; PADDING-RIGHT: 1px; BORDER-TOP: #cc0000 1px solid; PADDING-LEFT: 1px; FONT-SIZE: 1px; PADDING-BOTTOM: 6px; BORDER-LEFT: #cc0000 1px solid; WIDTH: 586px; COLOR: #cc0000; LINE-HEIGHT: 1.5; PADDING-TOP: 5px; BORDER-BOTTOM: #cc0000 1px solid; HEIGHT: 76px">

¡¤Progress has been made to keep Chrysler out of bankruptcy
protection.
¡¤Four banks will forgo claims to their portion of
Chrysler's 6.9-billion-dollar debt.
¡¤The Treasury needs to persuade all 46
banks and hedge funds that hold Chrysler debt to go
along.

A walking stop sign is seen in front of
the logo of Chrysler at a car dealership in New York, the United States,
April 7, 2009. The U.S. Treasury will provide a further five billion
dollars in loans to General Motors and 500 million dollars to Chrysler as
the automakers work on their viability plans, officials said Tuesday.
(Xinhua/Liu Xin)
Photo Gallery

WASHINGTON, April 28 (Xinhua) -- Progress has been
made to keep Chrysler out of bankruptcy protection as the Treasury Department
has reached a tentative agreement with four of the troubled U.S. automaker's
major debt holders.

Under the agreement, the four banks will forgo claims
to their portion of Chrysler's 6.9-billion-dollar debt in exchange for 2 billion
dollars in cash when the deal closes, the Associated Press reported on Tuesday,
quoting two people familiar with the talks.

"We view this as a huge step forward," said one of
the people, who spoke on condition of anonymity because the agreement has not
been formally announced.

The Treasury needs to persuade all 46 banks and hedge
funds that hold Chrysler debt to go along. If not, a bankruptcy filing could
still be possible for the nation's third largest automaker, the people said.

If the remaining debt holders agree to the deal, that
leaves a partnership with Italian automaker Fiat Group SpA as the lone remaining
hurdle to Chrysler meeting a government-imposed deadline on Thursday to complete
a number of major restructuring steps and become eligible for further government
aid, according to the AP report.

Two days ago, the United Auto Workers (UAW) union
reached a deal with Chrysler that would give it a 55-percent stake in the
company and assurances over issues like health care.

The accord will help pave the way for Chrysler to
forge an alliance with Fiat before the Thursday deadline to obtain additional
rescue loan from the government.

Chrysler has been living off 4 billion dollars in
government funds since the start of the year and would likely need more to avoid
bankruptcy.

Also on Tuesday, a top Fiat executive said he was
"confident" ahead of an announcement due on Thursday on a planned alliance
between Fiat and Chrysler that could save the struggling U.S. car maker from
possible bankruptcy, according to news reports.

"We are confident but we have to wait until Thursday
and respect the decision that will be taken. Negotiations are now in the hands
of the U.S. task force, the auto working group put together by President Barack
Obama," John Elkann, the deputy head of Fiat, was quoted as saying.

The file photo taken on April 15, 2009
shows the GM logo outside the GM headquarters in Detroit, the United
States. General Motors announced restructuring plans on April 27, 2009, to
cut 23,000 U.S. jobs by 2011, drop its storied Pontiac brand and slash 40%
of its dealer network in its latest bid to stay out of
bankruptcy.(Xinhua/Gu Xinrong)
Photo
Gallery

GM plans major revamp to get
government aid

BEIJING, April 28 -- General Motors Corp said Monday that
it will cut 21,000 factory jobs in the United States by next year, phase out its
Pontiac brand and ask the government to take company stock in exchange for half
of GM's government debt as part of a major restructuring effort needed to get
more government aid.

The struggling auto maker also said it will offer 225
shares of common stock for every US$1,000 in notes held by bondholders as part
of a debt-for-equity swap. The announcements came in a filing with the
Securities and Exchange Commission. Full story

General Motors expected to dump
Pontiac

CHICAGO, April 25 (Xinhua) -- The U.S. largest
automaker General Motors Corp. is expected to announce Monday its decision to
kill the Pontiac brand as part of a tougher restructuring plan being overseen by
the government, reports from Detroit said Saturday.

GM has started reaching out to Pontiac dealers ahead of a
public announcement about the brand's future, when the automaker likely will
also outline permanent plant closures, more job cuts and a tougher offer to
bondholders to slash the automaker's 28 billion U.S. dollars in unsecured debt.
Full story

Fiat still pursuing deal with
Chrysler

BEIJING, April 28 -- Fiat Group SpA still wants to forge
an alliance with Chrysler LLC if the United States auto maker is forced to file
Chapter 11 bankruptcy protection from creditors, a source close to the
Turin-based auto maker said Monday.

Fiat is continuing talks to reach a deal by the Thursday
deadline, the source said. Full story

Canada auto workers approve union
agreement with Chrysler

OTTAWA, April 26 (Xinhua) -- The workers of the Canadian
branch of Chrysler have voted in favor of a deal between their union and the
automaker, which would serve as a precondition for Chrysler to partner with Fiat
to avoid bankruptcy.

The deal was approved by 87 percent of those Chrysler
Canada workers who voted, the Canadian Auto Workers Union (CAW) said in a
release Sunday. Full story