Union denies deal on Chrysler bankruptcy

The United Auto Workers on Friday dismissed speculation on a deal with the Obama administration for Chrysler to undergo a "quick rinse" bankruptcy that could lead to a merger with Fiat.

Union spokesman Roger Kerson refused to comment publicly on reports of a deal that would lead Chrysler to file for Chapter 11 bankruptcy protection.

But other UAW officials said the US Treasury, which is handling the negotiations, was waiting for a response from Chrysler's principal creditors on proposals that would eliminate more than half the company's 6.9 billion dollars in debt in exchange for equity in the reorganized company.

Chrysler officials, who have been given until May 1 by President Barack Obama to come up with a solid restructuring plan, said only that discussions were continuing both with the company's stakeholders and Italian automaker Fiat.

"Chrysler will continue to work through the end of the month, based on the direction given by the Presidential Auto Task Force, to secure the support of the necessary stakeholders and reach a successful conclusion that the administration and US Treasury deems appropriate," a company spokeswoman said.

Chrysler's viability would be "enhanced through an alliance with Fiat, as it represents a change in the company's business model that expands its global competitiveness," she added.

"As we move forward in this process, we believe it's important to keep all options open."

Patrick O'Keefe of O'Keefe and Associates, which specializes in turning around manufacturing companies, said bankruptcy was the preferred route for Fiat to acquire Chrysler.

Once the firm has filed for Chapter 11, he said, Fiat "can pick and choose which of assets it wants."

But he described as problematic efforts by the UAW to secure its health care and other benefits ahead of other secured creditors such as banks and hedge funds as part of a bankruptcy deal.

Suppliers, which are critical to Chrysler's continuing operations, are also likely to balk if they believe the UAW is getting preferential treatment, O'Keefe said.

AFP