Chrysler rushed to clinch deals with Fiat SpA
U.S. President Barack Obama said concessions by Chrysler's unions and its major bank lenders had made him more hopeful than he had been just a month ago that the struggling automaker could be made viable.
But he added that it was still not clear if Chrysler would need to seek bankruptcy protection to cement concessions from its lenders and move ahead with a planned alliance with Fiat.
The details have not yet been finalized so I don't want to jump the gun, but I'm feeling more optimistic than I was about the possibilities about that getting done, Obama said in a news conference.
The White House has set a series of aggressive targets for Chrysler in order to justify another $6 billion in investment on top of the $4 billion in emergency loans that the government has extended since the start of the year.
The No. 3 U.S. automaker has won cost-cutting concessions from its unions in the United States and Canada and is on the brink of closing its deal with Fiat, a person involved in those negotiations told Reuters.
That leaves the focus on ongoing debt restructuring talks spearheaded by the Obama administration's autos task force and former investment banker Steve Rattner.
In a bid to win over three fund management firms that had spurned an offer to accept $2 billion in cash in exchange for writing off all of Chrysler's $6.9 billion in secured debt, U.S. officials sweetened the terms by throwing in another $250 million, people involved in those discussions said.
The three creditors who balked at the U.S. Treasury's $2 billion offer were Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital, sources said.
About 45 financial institutions hold Chrysler's secured debt. Failure to win their support on debt forgiveness would send the automaker into bankruptcy, officials have said.
An Obama administration official said Chrysler talks could run up to the deadline of 11:59 p.m. EDT on Thursday.
Fiat and Chrysler are prepared to complete a merger deal by Thursday that would be taken into bankruptcy court as a key element of the restructuring plan if needed, a person with direct knowledge of the preparations said.
Meanwhile, Chrysler's almost 27,000 U.S. factory workers represented by the United Auto Workers union were wrapping up a ratification vote on Wednesday on cost-cutting steps intended to make the automaker's wage and benefits competitive with its leanest rivals in the U.S. market.
If the new UAW contract is ratified as widely expected, it would give the union a 55-percent stake in a restructured Chrysler.
Results of the union ratification vote were expected by late Wednesday. At a local representing Chrysler's Twinsburg, Ohio stamping factory, 88 percent of workers voted in favor of the deal, the local union said in a recorded message.
GM BONDHOLDERS PROTEST
Chrysler's race to restructure has played out as a kind of prelude to the slower-moving process under way for its larger rival General Motors Corp
GM bondholders who represent about $27 billion of the automaker's debt are being asked to write off about 90 percent of what they are owed in a debt-for-equity exchange that the automaker launched this week over the protests of some investors.
Individual GM bondholders lambasted the exchange offer from the struggling U.S. automaker on Wednesday, saying they have been shut out of restructuring plans in favor of the U.S. government and organized labor.
What they've offered us is ridiculous, said Chris Crowe, 50, a Denver, Colorado-based home inspector at an event organized for small bondholders in this Detroit suburb. I know there are only so many pieces of pie, but they're giving us crumbs.
Auto dealers affiliated with both Chrysler and GM announced that they had hired a pair of high-profile law firms to represent their interests in the government-directed restructuring of both firms.
GM, which has been kept in operation with $15.4 billion of U.S. government funding, has until June 1 to push ahead with its own restructuring which includes plans to cut 40 percent of its U.S. dealers in less than two years.
Auto dealers are independently owned and protected by state franchise laws that industry executives have said could make it very expensive and difficult for GM to shut down dealerships.
GM's national dealer council hired Orrick Herrington & Sutcliffe LLP, the firm confirmed on Wednesday, a day after dealers demanded compensated in exchange for closing.
Chrysler's national dealer body hired Arnold & Porter LLP, the firm said on Wednesday.
(Reporting by Kevin Krolicki, Poornima Gupta, Soyoung Kim, David Bailey, Jeff Mason, Nick Carey, Jui Chakravorty, John Crawley, editing by Matthew Lewis, Bernard Orr)