Today is deadline day for Fiat and Chrysler to be in a position to convince the U.S. Treasury Department that the two carmakers can form a viable alliance for the future and with a number of key issues still to be resolved the complex talks are going right down to the wire. However a number of newswires are reporting sources involved in the negotiations saying that Chapter 11 bankruptcy is set to be announced today if agreement can't be reached with some stakeholders with the carmaker's most valuable components being spun into a new entity in which Fiat holds an initial 20 percent stake.

The biggest remaining obstacles to the deal has been the consortium of banks and hedge funds that hold US$6.9 billion of secured debt. Following offer and counter-offer between the lenders and the U.S. Treasury Department, the key four players in the consortium, including JP Morgan Chase and Citigroup, have agreed to cancel the debt in exchange for US$2 billion in cash. However they only hold 70 percent of the debt and with over 40 more institutions making up the rest of the lenders all have to agreed to this deal for it to go-ahead. With these smaller lenders stubbornly holding out for the full value, the U.S. Treasury Department is preparing for Chapter 11.

There were still no firm signs last night that a proposal could be presented today that would satisfy the government, which is currently propping Chrysler up having provided more that US$4 billion in loans since the start of the year. "I don't know if a deal is going to be finished or when a deal might be finished," Robert Gibbs, a White House spokesman told reporters aboard Air Force One on the way to Missouri where President Obama was due to address a Town Hall meeting to commemorate this first 100 days in office. "Hurdles still remain, but we remain optimistic and hopeful that something in the next many hours will get done that will provide a pathway for Chrysler's viability without continued government assistance," Gibbs added. If Chrysler and Fiat cannot come up with a proposal today the U.S. Treasury Department has said it will cut off funds, tipping the ailing carmaker into Chapter 11 bankruptcy.

Meanwhile Vice-President was also unsure if a feasible deal would materialise today. "Whether it all gets done in time and still locks up, completes the Fiat deal, which appears pretty close at hand, is going to be a close call," Biden told The Detroit News during a conference call with regional reporters yesterday. "So I'm not prepared to predict what that outcome will be. I do believe that within Chrysler is the capacity that either through this reorganisation on their own and tying up with Fiat and or an orderly reorganization in bankruptcy to survive and come out of this thing." Biden praised the "further sacrifices that the autoworkers have made and concessions they've made coupled with a number of Chrysler's debt holders have agreed to a deal where they would be willing to take considerably less cash for their stake in the company." However he admitted that "there are still some holdouts."

Giorgio Airaudo, the regional secretary general of the FIOM-CGIL union, based in Turin gave a positive reaction to the prospect of a deal with Chrysler. "For us the accord with Chrysler doesn't do any harm. It creates prospects because if Fiat becomes bigger it's more solid," Airaudo told Reuters in an interview. "If it's more solid there needs to be a guarantee that it stays in Italy. Because we don't want a Fiat that is strong in the world but disappears from Italy." Chrysler is an opportunity over the medium- and long-term, a business opportunity," he said said. However Airaudo was less upbeat about a deal with GM's European operations which could impact on jobs in Italy. "It's the next step that we're concerned about and are more interested in, in the sense that it's evident that Chrysler is the chip that's needed to acquire another operation," he added. "It's evident that if the next move was in Europe, the risk of overlap would be great."