Off the record comments made ahead of today's statement report that Chrysler will be given 30 days to strike a deal with Fiat otherwise no more aid will be forthcoming, although the Presidential Auto Task Force dismissed the US carmaker's current viability plan as being unrealistic. "There are still many, many hurdles that need to be overcome to make this deal work," said a source yesterday.

Unless Chrysler can wrap up its deal with Fiat by the end of April it will get no further aid on top of the US$4 billion of loans it has already received. However if the two companies can satisfy the Auto Task Force that they have a viable future then up to a further US$6 billion will be made available (Chrysler had asked for a further US$5 billion). If they can't do the deal - which calls for Fiat to take a 35 percent stake in Chrysler in exchange for providing its technology - then the American carmaker will be deemed not to be a viable stand alone business.

However the Auto Task Force, led by former private sector financier Steve Rattner is openly sceptical about the Fiat deal as outlined so far and believes that there is a huge amount of work to be done before it can be regarded as a viable proposition. "We have unfortunately concluded that neither plan [General Motors has also handed over its own viability plan] submitted by either company represents viability and therefore does not warrant the substantial additional investments that they requested."

The hurdles facing Chrysler and Fiat include proving that they won't need any more aid other than the tabled extra US$6 billion, as well as proving that they can convert bank and supplier debt liabilities into shareholder equity, reduce to close to zero the equity stakes held by Cerberus Capital Management (80.1 pct) and former owner Daimler which still holds the balance of stock, renegotiate contracts with the unions as well as to turn around half of union retiree liabilities into share capital, and be able to provide financing for its customers and dealers. Rattner sees a period of managed bankruptcy as possibly being the better option for Chrysler is it cannot reach agreements with its creditors.

The Auto Task Force dismissed the viability plan submitted by Chrysler on February 17 as being "unrealistic or overly optimistic". It criticised Chrysler's lack of investment in new models, platforms, flexibility, and its below-standard quality control. It was also concerned by the lack of models in the pipeline, just four all-new models spread across the Chrysler, Dodge and Jeep brands are scheduled to reach the market in the next five years.

Chrysler will also struggle to meet the Obama administration's recently imposed strict targets for US vehicle fuel economy. Combined car and light truck economy will have to average 27.3 mpg by 2011. "Chrysler may even have to restrict the sale of certain models to make sure it is in accordance with proposed standards," said a member of the Auto task Force.

Yesterday, in a television interview on CBS, US President Obama commented on the future of Chrysler and GM. "We think we can have a successful US auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is. The government would demand a "set of sacrifices from all parties involved, management, labour, shareholders, creditors, suppliers, dealers. Everybody's going to have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road," Obama added.

The worst than expected position of Chrysler has spooked investors in Fiat stock today with the share price down 7.07 percent to 4.89 euros per share in trading on the Milan bourse by 14:15 this afternoon at which point 25,361,092 shares had been traded in 11,607 transactions to a value of 125,865,848 euros. However the overall Italian stock market is trading down today in part due to jitters caused by the forced resignation yesterday of GM's President and CEO Rick Waggoner. It isn't expected though that the Obama administration will call for Chrysler's CEO Bob Nardelli to also resign.