Canada Says Chrysler Bankruptcy Not The Best Option

TORONTO (Reuters) – Canadian Industry Minister Tony Clement said on Friday that bankruptcy protection is not the government’s preferred option for Chrysler [CBS.UL], although it is a possibility.

“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 (Italian car maker) Fiat (FIA.MI) 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.

“As you know this is a critical period. It’s really a crisis,” Finance Minister Jim Flaherty said separately.

“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 added, speaking to CBC television from Washington.

“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 concession talks in Toronto between Chrysler and the Canadian Auto Workers union.

CAW President Ken Lewenza said late on Thursday that he expected a cost-savings agreement to be completed with Chrysler by morning.

One of the conditions set for government assistance by both Canada and the United States — as well as Fiat, which is looking at a strategic partnership with Chrysler — is significant concessions from the unions. (Reporting by John McCrank and Randall Palmer; editing by Peter Galloway)