Chrysler Heads For Bankruptcy as Creditor Talks Fail

The No. 3 U.S. automaker faces a government deadline of 11:59 p.m. Thursday. That deadline states that Chrysler was to have deals in place with labor and Italian automaker Fiat in place, as well as the creditor deal. While Chrysler was able to strike deals with labor and Fiat, debtholders, and smaller ones in fact, were the blockers.

An administration official stated Wednesday night:

"After a month of tireless negotiations, the Administration went into yesterday afternoon with the full support of Chrysler's key stakeholders, including the [United Auto Workers union] and the largest creditors. That support remains."

The administration added that talks with smaller creditors broke down when they refused to meet a deadline set by the Treasury Department to accept pennies on the dollars they had loaned the company.

According to MSNBC: Four banks with 70 percent of Chrysler's $6.9 billion debt had agreed to erase it for $2 billion, or less than 30 cents for each dollar held. That left Chrysler's fate in the hands of about 40 hedge funds with about 30 percent of the debt.

However, it is still expected that once Chrysler enters Ch. 11 protection, it will unite with Fiat and re-emerge. President Barack Obama is scheduled to talk about the auto industry in a press conference at 12 noon EDT.

Chrysler officials had no comment on the bankruptcy report. On April 24 reports already surfaced that Chrysler is already nearing bankruptcy.