Chrysler Moving Away From Bankruptcy; New Deal with Treasury

Chrysler's streak of good news isn't stopping! Daimler giving up it's stake in the company, ratified cost-cutting contract with the CAW, tentative agreement with the UAW and now a new deal with the U.S Treasury and debt holders has been reached.

The government is impressed with the speed of Chrysler's last-minute moves. Sources were saying the government was preparing the company for bankruptcy very soon, possibly in a week's time frame. While of course anything could happen, the bankruptcy option appears to be dimming while the very opposite thing is happening at General Motors.

A senior adminstration official has this to say about Chrysler "The agreement from Chrysler's principal banks is an exceptional accomplishment in line with the President's firm commitment that all stakeholders sacrifice to make this deal succeed".

GM's offer to bondholders was deemed as unrealistic, and CEO Fritz Henderson said that if the option was rejected, the company would be heading into bankruptcy. GM would offer 225 shares in exchange for each $1,000 in debt. "This offer demonstrates that the company and the auto task force, unfortunately, are pinning their hopes on an extremely risky and legally questionable turnaround in bankruptcy court, instead of engaging its lenders and workers in the very type of negotiations that could avoid such a fate.''

That was a statement from the advisors representing GM's creditors, who hold half of all it's debt. Doesn't too sound hopeful, does it?

Chrysler's deal on the other hand, was accepted. Chrysler's first-lien lenders who the company owed $6.9 billion, have agreed to write down that amount to $2 billion. In addition, the United Auto Workers Union is agreeing to cut the $10.6 billion that Chrysler owes to it's retiree health-care fund in half. That deal comes in exchange for 55 percent of ownership in the company, and possibly includes representation on the company's board.

These moves are truly 11th hour; April 30th is the government's deadline for Chrysler to reach a deal with Fiat. We'll have to see how it all pans out, but things are looking up for the company that most left for dead.