The Treasury is preparing a Chapter 11 bankruptcy filing for Chrysler LLC that could come as soon as next week, The New York Times reported on Thursday, citing people with direct knowledge of the matter.
The Treasury has an agreement in principle with the United Auto Workers union to protect pensions and retiree health care benefits as a condition of the bankruptcy filing, the paper said.
Italy's Fiat would finalize its alliance with Chrysler while the U.S. automaker is under bankruptcy protection, the paper reported.
Chrysler has until April 30 to complete its partnership with Fiat and win concessions from its first-lien lenders and the UAW, or face a cut-off of government funding and a potential bankruptcy.
The Times said U.S. and Canadian governments were prepared to provide the financing that Chrysler needed to operate while under bankruptcy protection.
Chrysler was not immediately available for comment.
(Reporting by Soyoung Kim, editing by Leslie Gevirtz)