Fiat CEO Sergio Marchionne has talked tough this week with Chrysler's unions, telling them that Fiat will walk away from the deal unless they lower their wage costs to reflect the wages paid in North America by the Japanese and German carmakers. In an interview with Toronto's Globe & Mail yesterday he said: "absolutely we are prepared to walk. There is no doubt in my mind we cannot commit to this organisation unless we see light at the end of the tunnel."

With the clock ticking away towards the April 30 deadline for Chrysler and Fiat to strike a deal set by the Obama Administration, Marchionne told the Globe & Mail that Chrysler's workers in the United States and Canada have to end their sense of entitlement if the ailing automaker is to be turned around. “The minute you talk to me about historical entitlement in an organisation that is technically bankrupt, it's a nonsensical discussion. There is no wealth to be distributed.”

The union's are reluctant to agree to much of a reduction in the hourly rates earned by their members and the Canadian Auto Workers Union (CAW) is reportedly taking an even tougher stance than its U.S. counterparts. "From what I can tell from a distance, the CAW may have taken more rigid positions,” Marchionne said during the interview. “The dialogue is out of sync," he continued, "I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort. No one else would put a dollar in. This is the worst condemnation of the viability of this business. We are not anti-organised labour. No one wants to remove the UAW (United Auto Workers) or the CAW from the table. But it will happen if a bankruptcy process drags on. The UAW and the CAW have a unique opportunity here to change the framework of the discussion," he added.

However the President of the CAW was swiftly stung into responding, saying that labour costs weren't an insurmountable obstacle. "There's no question that we need the Fiat deal, there's no question that we need the partnership," CAW President Ken Lewenza told reporters.

Marchionne told the newspaper that he might take on the CEO's job at Chrysler. “Fundamentally, that's possible, but the title isn't important,” he said. “What's important is that they hear me. It's possible that I will have to divide my time between running Fiat and running Chrysler.” He also wouldn't rule out the option of bankruptcy saying that it “is an option”. Some of Chrysler's 30 factories would close down if the alliance goes ahead and staffing levels at Chrysler's Auburn Hills, Michigan, headquarters would be reduced, commenting that "Fiat has an incredibly flat management structure. Chrysler needs a flat management structure.”

The hugely successful Car of the Year award winning Fiat 500 could be sold in the U.S. as early as next year, Marchionne said, adding that a new small car based on the 500's platform would be developed by Chrysler and would become a significant model in the revival plans. “Chrysler needs its own Cinquecento, meaning a model that is the remaking of Chrysler."