Treasury, Debt Holders Continue Chrysler Negotiations
Negotiations over the fate of Chrysler continue between the Treasury department and the banks that hold $6.9 billion of Chrysler's debt.
The two sides remain far apart, but people involved in the talks tell me they are making progress. Whether that progress will be enough to close a gap between what the Treasury is asking the banks to give up and what they are willing to give up remains to be seen.
The banks claim the Treasury department's latest proposal—which would shave their $6.9 billion in claims to $1.5 billion and give them a 5 percent equity stake in Chrysler—is not reflective of the so-called "shared sacrifice" the president has said the auto industry will require.
Rather, the banks maintain it is their sacrifice which would be by far the largest, while Fiat, which stands to own 50 percent of Chrysler's equity without putting up any money, would reap the rewards of that sacrifice.
That doesn't mean the banks aren't willing to come way off their current offer of $4.5 billion in new debt and 40 percent of the equity. They are, and one person close to the bank group tells me he is confident a deal will ultimately be reached somewhere between the two current proposals.
Time is of the essence. While April 30th is a self-imposed deadline, it does represent a point at which the government can move in a different direction should it be unable to craft a deal.
One thing that is off the table: a merger of General Motors and Chrysler. While such talks took place last fall they quickly dissolved amongst the mounting losses from both companies. That didn't stop Chrysler from trying one last time.
After Rick Waggoner was ousted, Chrysler's advisors called new GM CEO Fritz Henderson to gauge his interest in restarting talks with GM. He answered with an emphatic no.