The Treasury Dept. Preparing for a Chrysler Bankruptcy Filing

The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, The NYT reported on Thursday, citing people with direct knowledge of the action.

From The NYT: The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt…

If no agreement is reached between the government and Chrysler’s lenders, a nasty legal fight could emerge in bankruptcy….Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall.

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