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.
A union spokeswoman said the CAW would update the media on the talks at 6 p.m. EDT.
Earlier, Flaherty told CBC television that Chrysler was in crisis and required major changes.
“There has to be a fundamental change in the ... paradigm between the company and the management and the union if Chrysler is going to survive and not be liquidated, because that’s a possibility that that would happen,” he said.
“So what they’re working on is some sort of fundamental change that would result in survivability, quite frankly. It may require going through an organized bankruptcy.”
However, he said he understood progress was being made in talks with the union.
One of the conditions set for government assistance by both Canada and the United States -- as well as by Fiat -- is significant concessions from the unions.
Additional reporting by Louise Egan in Washington and Randall Palmer in Ottawa; editing by Peter Galloway