Chrysler deadline looms; unions are on board

DETROIT -- It's crunch time for Chrysler: The automaker has until Friday to slash billions of dollars in debt off its books and partner with Italian automaker Fiat.

Huge hurdles, no doubt. But this weekend it cleared two big ones: It successfully negotiated new deals with the United Auto Workers union and Canadian Auto Workers. The government had been leaning on the UAW to cut wages, making them on par with those of the transplant auto plants in the U.S. In a statement late Sunday, the UAW said the changes meet the requirements set forth by the Treasury Department.

The UAW has just until Wednesday to get the contract changes ratified by its members.

White House economic adviser Larry Summers said Sunday that the Obama administration is hoping Chrysler can keep itself out of bankruptcy court.

"We will certainly do our part to support a successful negotiation, but on the other hand, the president has made clear — and I think most Americans would share this view — that you've got to have responsibility, you've got to have accountability, and you can't have a situation where companies proceed on a permanent basis relying only on cash from the government," Summers said on Fox News Sunday.

Chrysler and its debt holders are still far apart on negotiations to cut the automaker's debt from $6.9 billion to $1 billion. On Friday, bondholders offered a counterproposal that would cut the company's debt to $3.5 billion, a source says.

The source, who was briefed on the matter but does not want to be named because the discussions are not public, said the bondholders want to take a 40% equity stake in Chrysler, which would give the loose group of debt holders a larger share than former parent Daimler.

Slashing the debt is a significant hurdle that needs to be cleared before the Fiat deal can be finalized.

Chrysler is existing on a $4 billion loan from the government and could get up to $500 million more in the coming days just to stay alive. Last month, President Obama rejected the automaker's request for billions more in additional loans, saying the automaker could not survive without a partner. Chrysler has until Friday to close the deal or it could end up filing for bankruptcy.