Chrysler will file for Chapter 11 bankruptcy after talks with a small group of creditors crumbled just a day before a government deadline for the automaker to come up with a restructuring plan for the company’s $6.9 billion in secured debt, President Barack Obama says.
Chrysler will be given time to cement a partnership with the Italian carmaker Fiat Group SpA. The federal government, which has already poured $4 billion in loans into Chrysler, would provide up to $8 billion more to carry the company through bankruptcy, said administration officials speaking anonymously to the Associated Press. The government will also help appoint a new board of directors. “This is not a sign of weakness,” Obama says. “I have every confidence that Chrysler will emerge from this process stronger and more competitive.”
Under bankruptcy, Chrysler would still sell cars and the government would back its auto warranties. No job losses or plant closings were announced today, but it will be up to Fiat and Chrysler to decide whether to restructure the company, officials say. The bankruptcy will be filed under a section of the law that allows a company to shed bad assets and some liabilities. The administration expects it to last only up to 60 days.
