Last-ditch talks were under way tonight in an effort by the US treasury to persuade reluctant lenders to back a rescue package for the stricken carmaker Chrysler as the clock ticked down to a deadline for possible bankruptcy today.
Barack Obama is expected to make a speech tomorrow morning on the future of the Detroit-based motor manufacturer which employs 58,000 people and makes brands including Dodge and Jeep.
The White House was preparing two sets of remarks – one to be used in the event that Chrysler declares bankruptcy and a second in case the carmaker pulls off an escape at the 11th hour, the Wall Street Journal reported.
Signals were mixed yesterday. President Obama told voters at a town hall meeting in Missouri: "We don't know yet whether the deal is going to get done."
He said workers had made "enormous sacrifices" but other stakeholders needed to follow: "Are the bondholders, the lenders, the money people – are they willing to make sacrifices as well?"
A few dozen lenders, including hedge funds, are proving hold-outs to an arrangement which would carve up Chrysler between the United Auto Workers' union, which would get a 55% stake, and the Italian carmaker Fiat, to own 35%.
The lenders have been offered cash of just $2bn to cancel loans of $6.9bn and some believe they could get more money by dragging Chrysler through the bankruptcy courts.
Banks accounting for the bulk of Chrysler's debt, including JP Morgan, Citigroup and Goldman Sachs, have signed up but all 46 of the company's creditors need to be in agreement.
David Whitson, a motor industry analyst at research firm Morningstar, said political pressure could sway the outcome: "To come so close and then liquidate the company simply because a few hedge funds don't want to participate – I don't think President Obama wants to take that risk."
Fiat is said to be ready to sign a crucial alliance today which would commit it to a technology-sharing pact. If the rescue package is ratified, Chrysler will effectively be owned by its biggest union, which is receiving shares in lieu of billions of dollars owed to an employee healthcare fund.
The third largest US carmaker, Chrysler is based in a complex at Auburn Hills, Detroit, which is said to be the second biggest office building in the US, behind the Pentagon.
