Chrysler-CAW deal likely by Friday, union head says

The Canadian Auto Workers expects to have a deal with Chrysler by Friday morning, union president Ken Lewenza says.

"With a good effort from everybody, we should have this done sometime by tomorrow morning," he told reporters Thursday night in Toronto, adding that his members will likely make concessions.

CAW and Chrysler are under pressure in Canada and the United States to come up with a deal as the car company  scrambles to meet an April 30 deadline to swap debt for equity, reduce labour costs and forge an alliance with Italian automaker Fiat Group SpA.

Failure to meet the government-imposed deadline would mean an end to further government financial aid and probably bankruptcy protection, perhaps ending in liquidation of the company.

Ontario Economic Development Minister Michael Bryant said progress has been made in the talks between Chrysler and the CAW over union concessions. Bryant spoke with CAW president Ken Lewenza Thursday morning.

Chrysler is demanding a reduction in labour costs of $19 an hour. If there isn't a substantial reduction, Fiat has said there'll be no alliance and the Canadian government has said it won't provide government money to the company.

A media report Thursday said the Ontario and federal governments are in discussions with the U.S. Treasury on a plan to provide up to $40 billion US in bankruptcy financing to both Chrysler and General Motors to allow them to operate while they restructure under court supervision.

The Canadian contribution would amount to about $6 billion US, reflecting Canada's share of North American production.

Charlotte Yates, an auto industry analyst and dean of the Faculty of Social Sciences at McMaster University in Hamilton, sees the plan as a parallel process to the negotiations between the companies and unions.

Deal on concessions looms

Yates said the two sides still have to reach a deal on concessions, whether the automakers avoid bankruptcy protection or not.

"We've known for at least a week, if not more, that it was likely that at least one if not both of the companies would go into bankruptcy for presumably … a short period of time," she said.

"Even the union has been talking about how they feel that it is more likely than it was, say, three weeks ago when we first started to kind of get into the heated debate about this," she added.

A Ford Motor Co. executive said Thursday that his company expects to get the same concessions that unions make to Chrysler and GM.

"Our expectation is we would not be placed at a disadvantage," Marty Mulloy, vice-president of labour affairs, told reporters.

The Big Three automakers and the United Auto Workers (UAW) agreed on concession deals in February. Workers at Ford, which is not receiving government aid, ratified their deal, but the GM and Chrysler pacts were never presented to union members.

In Canada, the CAW reached a concession agreement with GM, but Chrysler has refused to accept the same deal, calling it inadequate.

Chrysler bankruptcy filing in works: report

The New York Times is reporting that the U.S. Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week. The newspaper cites people with direct knowledge of the action.

The sources said Treasury has an agreement in principle with the UAW, whose members’ pensions and retiree health-care benefits would be protected as a condition of the bankruptcy filing.

The report said Fiat would complete its alliance with Chrysler while the company was under bankruptcy protection.

A major unresolved question is what would happen to Chrysler’s lenders, who hold $6.9 billion US in company debt.

The Treasury has made a new offer to the lenders, asking banks and hedge funds to forgive $5.4 billion and take a five per cent stake in a Chrysler-Fiat alliance.

The proposal, which would give the lenders about 22 cents on the dollar, is in response to the lenders' offer to forgive $4.5 billion in debt in exchange for a 40-per-cent stake in the alliance.

Bankruptcy experts have said that Chrysler's major lenders are unlikely to settle for pennies on the dollar because their loans are secured by the company's physical assets. They also likely purchased credit default insurance that would repay them if Chrysler defaults on the loans.

Including secured debt and government loans, Chrysler owes about $23.5 billion US, including $10.5 billion to a UAW trust fund that is to take over retiree health-care costs starting next year.

Chrysler is negotiating with the union to take equity in the company in exchange for part of the trust fund obligation.

No Fiat cash now for Chrysler

Fiat CEO Sergio Marchionne affirmed the company's "unwavering commitment" to its proposed alliance with Chrysler on Thursday, but said Fiat won't put up any cash at this stage.

Marchionne said it would only consider committing cash further down the road "at the relevant time as the need arises" for an industrial collaboration that would be of benefit to Fiat.

Fiat is offering fuel-efficient powertrain and other technology that will help Chrysler expand into the small car market in return for a 20 per cent stake in the U.S. automaker.

"I think we do bring sufficient technology and know-how to this organization to justify acquiring an equity stake," he said. "This whole notion of attaching cash to the introduction of Fiat into Chrysler is something I find really unjustifiable."

Marchionne made his comments in a conference call with analysts after Fiat announced a first-quarter loss of $531 million US.