updated 4/15/2009 6:51:45 PM ET 2009-04-15T22:51:45

With just 15 days left before the U.S. government pulls the plug on Chrysler, the only man who appears able to save the struggling automaker is casting doubt on whether a deal can be worked out.

Fiat CEO Sergio Marchionne, in an interview published Wednesday, said the Italian automaker will walk away from a nonbinding agreement to take a 20 percent stake in Chrysler and share its small car technology unless the U.S. automaker’s unions agree to major cost cuts.

A Fiat spokesman confirmed Marchionne’s statements.

Chrysler, which is living on $4 billion in loans from the U.S. government, has to take on a partner and gain concessions from unions and debtholders by April 30, or the Obama administration will stop lending it money. No other suitors have emerged, and it’s likely that no bankruptcy financing will be available, so Chrysler would have little choice but to be auctioned off in pieces.

Marchionne’s comments, made in an interview with the Toronto Globe and Mail, could be designed to pressure unions to give further concessions.

The United Auto Workers union already has agreed to cost reductions, but the Obama administration has said it must agree to further cuts to make Chrysler more competitive with foreign automakers.

The Canadian Auto Workers union reached a deal with General Motors Corp., but Chrysler says the pact doesn’t go far enough, and the company has threatened to pull out of Canada without further cuts from the union.

The uncertainty adds to worries for Chrysler’s 54,000 employees as well as thousands more who work for parts suppliers and dealers across North America.

“There’s definitely some worry and concern about what’s going on,” said Brett Ward, 35, a 15-year Chrysler worker who drives a forklift at an assembly plant in the Detroit suburb of Sterling Heights. “We haven’t been asked to vote on the contract changes yet.”

Ward, who is far too young to retire, just started classes to become a nurse in case Chrysler goes under. His factory, which makes the midsize Chrysler Sebring and Dodge Avenger, is in the third week of a four-week shutdown due to slow sales.

No one is entirely sure just how much the unions have to give to satisfy the U.S. government, which said only that unions must make concessions that are deeper than those the Bush administration outlined when it approved government loans last year.

Shortly after Marchionne’s comments were published, CAW President Ken Lewenza said the union would return to the bargaining table with Chrysler on Monday after a two-week hiatus. But he later said the union won’t stray from the GM deal. The UAW declined comment.

Chrysler would not comment beyond a statement that said the company has a goal of reaching a conclusion by the April 30 deadline.

Marchionne’s statements surprised some of Michigan’s lawmakers who had been told that talks with the unions were proceeding well.

Democratic U.S. Rep. Gary Peters, whose district includes Chrysler’s 15-story headquarters building in Auburn Hills, said he met with CEO Robert Nardelli and other Chrysler officials Tuesday and was told that debtholders were the big trouble spot.

Chrysler owes a group of banks and hedge funds $6.9 billion, and the Treasury Department, which oversees the Obama administration’s auto task force, wants them to erase the debt for 15 cents on the dollar. The creditors rejected that offer and are readying a counteroffer, according to a person briefed on their plans.

“The focus of our discussion yesterday was about the challenges that they’re having with their creditors right now,” Peters said Wednesday. “The UAW has made concessions already to Chrysler. As far as making further concessions, they have made it fairly clear that they don’t want to be the only party at the table.”

Sen. Debbie Stabenow, D-Mich., said she talks almost daily with the auto task force and was told progress is being made, including talk of a new board structure for Chrysler that involves Fiat.

“I would question if this is a negotiating tactic, because I know that they have been moving along on a number of fronts,” Stabenow said.

If Chrysler reaches a deal with Fiat, President Barack Obama has said the government is willing to lend up to $6 billion to the automaker on top of the $4 billion it already has received. The government has determined Chrysler cannot survive independently.

Obama spokeswoman Jennifer Psaki said Wednesday that “the president remains hopeful that all stakeholders will come together and overcome the hurdles necessary to make this deal a success.”

But Marchionne said in the interview that without labor cost concessions, the Fiat deal will not happen.

“Absolutely we are prepared to walk. There is no doubt in my mind,” he said. “We cannot commit to this organization unless we see light at the end of the tunnel.”

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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