Obama Said to Plan for Chrysler Bankruptcy, Alliance

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By Mike Ramsey and Christopher Scinta

April 29 (Bloomberg) -- President Barack Obama plans to announce tomorrow that Chrysler LLC will be placed into Chapter 11 bankruptcy, leading to an alliance with Italian automaker Fiat SpA, people involved in the matter said.

Administration officials are still resolving outstanding issues, and the plan is not finished yet, said one of the people, who declined to be named. Any bankruptcy filing could come as soon as tomorrow, people familiar with the matter said.

Chrysler’s best assets would be sold to a new entity that would have an ownership structure similar to that envisioned in an out-of-court deal between the Auburn Hills, Michigan-base automaker and Turin, Italy-based Fiat, the people said.

The Italian company would become a 20 percent owner of Chrysler, and a union retiree health-care trust fund would own 55 percent, with the rest of the company staying in the government’s hands initially, people familiar with the matter said.

Chrysler has made progress in out-of-court restructuring, including reaching labor deals with the United Auto Workers union and Canadian Auto Workers on new contracts. Chrysler Chief Executive Officer Bob Nardelli said today in a memo to employees that the company is waiting to hear whether its 46 lenders will agree to take $2 billion in cash to wipe out $6.9 billion in secured debt.

Calls and e-mails to Chrysler spokeswomen, Lori McTavish and Shawn Morgan, seeking comment were not immediately returned.

To contact the reporter on this story: Michael Ramsey at mramsey6@bloomberg.net
Last Updated: April 29, 2009 16:04 EDT http://www.bloomberg.com/apps/ne ... E4S8&refer=home