The American car manufacturer Chrysler was just hours from bankruptcy this morning after last-ditch rescue talks between its creditors and the US government collapsed.
Hopes that the automaker could avoid going bust were fading after the Wall Street Journal reported that Chrysler’s lenders had rejected a deal that would have reduced its $7bn (¬£4.7bn) debt mountain.
The Obama administration has set Chrysler a deadline of midnight tonight Washington time (4am Friday GMT) to complete a restructuring, or file for bankruptcy.
Without a deal on its debt, analysts now expect Chrysler to file for Chapter 11 protection, perhaps later today. This could precede an alliance with Italy’s Fiat, which has been negotiating with Chrysler for weeks.
Going into Chapter 11 would make it easier for Fiat to cut back on Chrysler’s dealer network, which includes 78 dealerships in the UK.
Chrysler has been loaned $4.5bn by the US government, and will receive another $6bn if it can complete its restructuring.