Chrysler: Signs of survival emerge
As deadline to prove its viability approaches, President Obama says in national news conference that he is 'hopeful' the automaker can make it.
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NEW YORK (CNNMoney.com) -- As the clock ticked down Wednesday on a government-imposed deadline for Chrysler LLC to prove its viability, expectations grew that the troubled automaker would survive.
President Obama, speaking at a prime-time news conference, said he was more hopeful than he was a month ago that a deal could be struck between Chrysler and Italian automaker Fiat.
"What we've seen is the unions have made enormous sacrifices, on top of sacrifices they've previously made," Obama said. "You've now seen the major debtholders come up with a set of potential concessions they can live with. All that promises the possibility that you can get a Fiat-Chrysler merger."
Earlier on Wednesday, a source familiar with the negotiations had said Chrysler will not be forced to shut down but that the embattled company may still wind up declaring bankruptcy.
"Chrysler will survive and avoid liquidation, whether that happens in or out of bankruptcy remains uncertain at this point," the source said.
The negotiations over Chrysler's fate are expected to continue, possibly right up midnight Thursday, according an Obama administration official.
The Treasury Department's auto industry task force found in late March that Chrysler was no longer viable as a stand-alone company.
In order to qualify for additional federal assistance to keep the company afloat, the task force said Chrysler needed to undertake several restructuring efforts. Those included reaching deals with its creditors, its unions, as well as with Italian automaker Fiat. The government gave Chrysler until the end of April to accomplish those goals.
On Wednesday, the fate of Chrysler remained in doubt and many details about 11th hour negotiations to save it were unclear. But progress on several fronts was evident.
Fiat could finalize a deal with Chrysler even if the company is in bankruptcy, according to various reports, and may be close to doing so.
Major banks that are among those that have lent Chrysler $7 billion have already agreed to significantly reduce that debt, Treasury Department sources said Tuesday.
And on Sunday, Chrysler and UAW leaders said they had reached an agreement on major concessions that would reduce Chrysler's labor costs. The results of a vote by union members on that deal are expected Wednesday night.
The UAW has not released details of the proposed new labor pact, but the union has agreed to accept privately-held stock in Chrysler. The stock would go into a union-controlled trust fund that will be used to pay future health care costs for more than 55,000 Chrysler retirees and their family members.
Chrysler has just under 39,000 U.S. employees, 60% below the number of American workers it had at the beginning of the decade. It also has about 9,400 workers in Canada, where 87% of the Canadian Auto Workers union members ratified a separate labor deal over the weekend.
General Motors, which has also received federal help to avoid bankruptcy, has until the end of May to reach deals with its creditors and unions. It proposed a plan Monday that would give its creditors a 10% stake in that company, while giving the government and the union up to an 89% stake.
According to a report in the Washington Post, Chrysler Chief Executive Bob Nardelli would be replaced by Fiat management as part of a bankruptcy plan being finalized by Treasury.
The Obama administration, along with the Canadian government, would provide an additional $4 billion in financing while Chrysler is in bankruptcy, the Post reported. The United States would provide another $5 billion in support following a bankruptcy reorganization.
Under this plan, the United Auto Workers union's retiree health plan would get a 55% stake in the company, Fiat 35%, the U.S. government 8% and the Canadian government 2%, according to the Post.
Chrysler creditors would get $2 billion and no equity stake while Cerberus Capital Management, which now owns most of Chrysler, would get nothing, the report said.
CNNMoney.com senior writers Chris Isidore and Jennifer Liberto contributed to this story. 
