Clement says Chrysler bankruptcy not best option

Fri Apr 24, 2009 3:06pm EDT
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By John McCrank

TORONTO (Reuters) - Bankruptcy protection is not the Canadian government's preferred option for Chrysler, although it is a possibility, Industry Minister Tony Clement said on Friday.

Clement made the remarks while Chrysler and the Canadian Auto Workers union were in intense talks to reach a cost-saving deal that would meet the approval of Italy's Fiat SpA, which is looking at a strategic partnership with Chrysler, as well as the U.S., Canadian and Ontario governments.

"Well, the preferred option is that there is no bankruptcy protection because the company (has become) viable and has reached a deal, in this case with Fiat, in order to move forward," Clement told reporters.

It does clearly remain one of the options, however, along with a complete winding up of the company, he said.

Finance Minister Jim Flaherty told Reuters in Washington that the Canadian, U.S. and Ontario governments were discussing providing the debtor-in-possession financing that would be needed in the event of bankruptcy protection.

Bankruptcy protection would take place in the United States under Chapter 11 of the U.S. Bankruptcy Code and in Canada under the Companies' Creditors Arrangements Act (CCAA).

"Certainly, one of the things that's being looked at is a way ... if they decide to reorganize through CCAA, how do they finance themselves during the time they're in bankruptcy," Flaherty said. "That's what the government has been talking to them about."

Chrysler met with the CAW late into Thursday night. Union President Ken Lewenza said on Thursday evening that he expected an agreement by Friday morning, but the two side were still hard at negotiations by early Friday afternoon.   Continued...

<p>Canada's Minister of Industry Tony Clement speaks during a news conference in the foyer of the House of Commons on Parliament Hill in Ottawa in this April 7, 2009 file photo. REUTERS/Blair Gable</p>