**Obama Said to Plan for Chrysler Bankruptcy, Alliance
By Mike Ramsey and Christopher Scinta
April 29 (Bloomberg) -- President Barack Obama aims 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 isn’t finished yet, said one of the people, who declined to be named because discussions are private.
As part of ongoing negotiations, the U.S. Treasury raised its offer to Chrysler’s lenders, offering them $2.25 billion in cash to forgive $6.9 billion in secured debt, two other people familiar with the matter said. The previous offer had been for $2 billion in cash.
Any bankruptcy filing could come as soon as tomorrow, people familiar with that 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-based automaker and Fiat, based in Turin, Italy, 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, the people said.
Progress Made
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. 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 cash to wipe out $6.9 billion in secured debt.
Calls and e-mails to Chrysler spokeswomen, Lori McTavish and Shawn Morgan, seeking comment weren’t immediately returned. Jenni Engebretsen, a Treasury spokeswoman, didn’t immediately return an e-mail seeking comment.
One issue remaining is the U.S. government’s effort to combine Chrysler Financial and GMAC LLC, the lending units affiliated with Chrysler and General Motors Corp.
The idea is to ensure that Chrysler has a well-capitalized credit arm, as required by Obama’s automotive task force, said people familiar with the situation.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., has expressed concern that such a combination would involve her agency guaranteeing its debt, according to two people familiar with her views.
Bair is reluctant to be drawn into bailing out auto-finance companies to the potential detriment of the FDIC’s deposit insurance fund, according to the people, who asked not to be identified because the discussions are private.
Andrew Gray, an FDIC spokesman, Amber Gowen, a Chrysler Financial spokeswoman, and Gina Proia, a spokeswoman for GMAC, declined to comment.
To contact the reporter on this story: Michael Ramsey at mramsey6@bloomberg.net
