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 |  Apr 30 2009, 1:18 AM

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President Obama is expected to announce tomorrow that Chrysler will in fact file for bankruptcy; according to a report by Bloomberg. The Wall Street Journal, however, says that Obama currently has two speeches drafted for tomorrow’s press conference: one if the struggling automaker files for Chapter 11, and one if it doesn’t.

The Chapter 11 option seems the most likely at this point as it would make the alliance with Fiat a smoother process.

The only way Chrysler will avoid the “B” word is if the companies that it is indebted to agree to accept a cash offer in exchange for that debt. That may sound like a more than fair trade, were it not for the fact that the cash value is just $2 billion, in exchange for $6.9 billion in debt.

While the federal government has made an agreement with the largest lender, other major players, including Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital are holding out. According to David Cole at The Center for Automotive Research in Ann Arbor, MI, if those lenders have insurance policies that cover them completely in the case that Chrysler fails, then it’s in their best interests to see that bankruptcy is the solution.

President Obama, speaking on the topic at a Town Hall meeting in St. Louis today said that if bankruptcy happens it will be “real quick.”

But with billions on the line and numerous big players involved it’s not clear how even the Federal Government could stop the restructuring of Chrysler from taking years in court.

The Washington Post has reported that a Chrysler/Fiat alliance would see Chrysler CEO Bob Nardelli ousted from his current position in favor of an executive from Fiat.

 

[Source: Automotive News]