Report: U.S. Treasury preparing for a Chapter 11 bankruptcy for Chrysler

According to people with “direct knowledge” of the matter, the U.S. Treasury Department is preparing for a Chapter 11 bankruptcy filing for Chrysler as the automaker continues to work out concessions with the UAW, CAW and its lenders in an effort to follow through with partnership with Fiat.

It is reported that Fiat would continue to complete its alliance with Chrysler while the automaker is under bankruptcy protection.

Sources said that the Treasury has an agreement with the UAW which will protect worker pensions, retiree health care and benefits as a condition of the bankruptcy filing.

However, it is still unclear what will happen with Chrysler’s lenders who currently hold $6.9 billion in company debt. The U.S. government has made an offer which would give lenders $1.5 billion and a 5 percent stake in the new Chrysler/Fiat partnership.

Earlier this week, lenders proposed forgiving $2.5 billion in exchange for a 40 percent stake in the new Fiat and Chrysler alliance.

– By: The Daily Auto Editor

Source: New York Times