Chrysler's lenders and a Canadian union continued talks with less than a week to a U.S. government deadline to cut deals, as Ford Motor Co posted a $1.4 billion loss that was less than analysts had expected.
Ford shares soared more than 15 percent on Friday after the automaker also said that its cash burn rate was substantially lower in the first quarter than it had been in the two proceeding quarters and was likely to decrease further as the year progressed.
But Chrysler remained the main focus of the North American auto sector. It faces an April 30 deadline to reach deals that would cut its debt, labor costs and cement an alliance with Italy's Fiat SpA to satisfy the Obama administration.
Chrysler has been operating under $4 billion of emergency U.S. government loans and would need to complete those agreements to maintain its funding and receive more. Without additional support, Chrysler could liquidate.
A critical part of the Chrysler restructuring is reducing about $7 billion of first-lien secured debt generated when the automaker broke away from Daimler AG in 2007. Daimler retained a nearly 20 percent stake in Chrysler.
Lenders have balked at taking a severe haircut on the first-lien debt, but they made a new offer to the U.S. Treasury on Friday, a source briefed on the matter told Reuters.
Talks between Treasury and the lenders have intensified as the deadline approaches. On Wednesday, the Treasury offered the lenders $1.5 billion and a 5 percent equity stake in a restructured Chrysler in exchange for the debt.
The lenders had offered to retain about $4.5 billion in debt and take a 40 percent stake in a new Chrysler supported by government investment and the Fiat deal. The new offer cut that to $3.75 billion and dropped a requirement that Fiat make a $1 billion additional investment in Chrysler.
CHRYSLER TO DEALERS: MAKING PROGRESS
Chrysler, about 80 percent controlled by Cerberus Capital Management, told its U.S. dealers on Friday that it was making progress in its restructuring talks with the U.S. government and had no plans to file for bankruptcy before the end of month government deadline.
On Thursday, Canadian Auto Workers President Ken Lewenza told reporters that the union expected to complete a cost-savings agreement with Chrysler on Friday.
On Friday afternoon, the union said that Lewenza would provide an important update on negotiations at 6 p.m. EDT.
Canada's Industry Minister Tony Clement said on Friday that bankruptcy protection would not be the government's preferred option for Chrysler.
The immediate deadlines for Chrysler partly eclipsed General Motors Corp struggle. The Obama administration rejected a GM restructuring plan, ousted its chief executive and told the automaker to cut deeper and move faster if it wanted to continue to receive government support.
On Thursday, GM announced plans to slash production in North America over the next three months.
GM has been operating under $13.4 billion of U.S. government emergency loans and a transaction report on Friday showed that the Treasury had given the automaker another $2 billion loan for working capital.
The Obama administration has said it planned to provide GM with up to $5 billion of additional working capital and Chrysler with $500 million as they raced to meet restructuring deadlines.
In Europe, auto sector consolidation remained the focus.
Armin Schild, a labor leader who holds a seat on Opel's supervisory board, rejected the idea of a Fiat bid for Opel, preferring an investor such as Magna International, a Canadian parts maker that has also been cited as a possible investor.
Opel, GM's German unit, is being spun off with the UK's Vauxhall Motors and seeking investors.
European Union Industry Commissioner Guenter Verheugen said he did not know how Fiat would finance a deal with Opel, which drew a sharp response from Fiat's CEO Sergio Marchionne, who asked him to assist the industry rather than issue death sentences.
(Reporting by David Lawder, Poornima Gupta, John McCrank, Kevin Krolicki, Jui Chakravorty Das, David Bailey; Editing by Toni Reinhold)