US Treasury Preparing Bankruptcy Filing For Chrysler

While Chrysler and Fiat nut out an alliance deal that will meet the needs of both manufacturers, the US Treasury is, according to The New York Times, already preparing the paperwork for the embattled American carmaker’s bankruptcy.

The NYT report says that the Chapter 11 documents being prepared will allow for a Fiat and Chrysler alliance to go ahead even after Chrysler is declared bankrupt.

It is also believed to contain an “agreement in principle” that would see the benefits packages – including pension and retiree health care – of United Auto Workers protected in the deal.

The main question that remains is what is to become of Chrysler’s debts. With the company’s debt holders previously unwilling to bend on the US$7 billion owing, the looming shadow of bankruptcy is likely to motivate more enthusiastic discussion.

This week, the US Treasury offered Chrysler’s lenders a figure that amounts to about 22 cents in the dollar per share, or a total of US$1.5 billion.  A counter-offer is expected Friday (Saturday, Australian time).