General Motors moved closer to filing the largest bankruptcy ever for a US industrial company after a crucial bond exchange proposal failed, while the fate of GM's European brand Opel remained uncertain after marathon talks with German officials ended without a deal.
At the same time, bankrupt US automaker Chrysler faced a key court hearing expected to clear the way for Fiat SpA to take control of its best assets on the fast-track schedule set by President Barack Obama's administration.
Less than a month after it filed Chapter 11, Chrysler is seeking approval to sell its stronger operations to a “New Chrysler” owned by Fiat, labor unions and the US and Canadian governments, in exchange for $2 billion paid to lenders.
The court hearing into the Chrysler sale is set to continue today in New York.
With the Chrysler case nearing conclusion, attention was shifting to the complications expected from GM's bankruptcy - expected within the next few days - and the sale of Opel.
Fiat is also in the race to win control of Opel, part of chief executive Sergio Marchionne's ambitious attempt to build an automotive alliance that could rank as the world's second-largest by sales behind Japan's Toyota.
The bidding battle for Opel had narrowed to a two-way race between Fiat and Canadian auto parts company Magna Internationa, German ministers said after more than 12 hours of talks stretching well into this morning.
Belgium-listed holding RHJ International SA and China's Beijing Automotive Industry had also submitted bids.
But ministers said they had been unable to reach a deal to provide Opel with temporary financing if GM files for bankruptcy in the United States.
“We have made demands on the US Treasury and expect answers by Friday and we will need these answers in order to agree a plan," Economy Minister Karl-Theodor zu Guttenberg said. “We don't have the security yet that we need to commit to bridge financing today.”
Finance Minister Peer Steinbrueck spoke of "surprises and disappointment" with the US negotiators, saying GM had shocked participants by announcing it needed €300 million more in short-term cash.
Reuters