The good news is that Chrysler LLC and the United Auto Workers union have reached a tentative agreement on contributions to a retiree healthcare trust and labor costs. Bloomberg reports that the deal calls for the trust to take a
stake of about 20% in a restructured Chrysler in lieu of some of the cash the company would have been required to kick in.
As Lou Whiteman noted on Pipeline Sunday night, now Chrysler
can turn its full attention to negotiating concessions with holders of $6.8 billion in secured debt.
The bad news is that Chrysler and its lenders have only until Friday -- the deadline set by the Obama administration's automotive task force -- to reach a deal. And despite several offers and counteroffers, the two sides remain far apart.
The state of play Monday morning: Treasury was offering 5% of the company in exchange for forgiving nearly 80% of the debt. The banks and hedge funds who hold the debt, meanwhile, were seeking 40% of the company in exchange for writing off more than $3 billion in debt.
But deadlines do concentrate minds, and the fact that the union now has a tentative deal could raise pressure on the banks, themselves beneficiaries of government bailout money, while also making them more comfortable that the equity they do get will be a piece of a more viable company.
Whiteman says a new government offer could come as soon as Monday. It will be an interesting week. -
Kenneth Klee
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