Looks like Chrysler is headed for a Preplanned Reorganization Bankruptcy instead of Liquidation

The New York Times is reporting Chrysler has made a deal with the UAW and is headed to a Chapter 11, pre-arranged bankruptcy that is not a liquidation.

The deal includes Fiat, the Italian automaker with which Chrysler was ordered by the government to form an alliance before Thursday.

Neither the United Automobile Workers union nor the company released details of the tentative agreement, which would modify the union’s 2007 contract and reduce the amount of money Chrysler must pay into a new health fund for retirees.

Some of the terms, which are not officially released are:

A new company would be set up with the best assets of Chrysler, these people said. Fiat of Italy would own 20 percent to 35 percent of the new Chrysler, they said, with the government also holding a stake. Some of the equity in the new company would also be given to Chrysler’s creditors as repayment.

In this case, exchanging equity for secured debt in a new company sounds like fairly good news, considering we were hearing complete liquidation in February.

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