April 30, 2009 / 4:31 AM / 11 years ago

UPDATE 1-US govt, Chrysler lender talks break down - WSJ

* Talks collapse despite raised offer

* Sources say Chrysler bankruptcy “all but certain”

DETROIT, April 30 (Reuters) - Talks between the U.S. Treasury Department and Chrysler LLC lenders aimed at cutting the automaker’s debt and keeping it out of bankruptcy broke down late on Wednesday, the Wall Street Journal reported, citing people familiar with the discussions.

The collapse of talks make it all but certain that Chrysler — 80 percent controlled by private-equity firm Cerberus Capital Management LP [CBS.UL] — will file for bankruptcy, the WSJ said, citing those sources.

According to people familiar with the matter, the talks broke down despite a revised offer from the Treasury of $2.25 billion to forgive $6.9 billion in Chrysler debt, up from its previous proposal of $2 billion, the WSJ said.

Chrysler has until the end of the day on April 30 to slash its labor and debt costs, and consummate an alliance with Italian automaker Fiat SpA FIA.MI.

Failure to do so means further emergency government aid for Chrysler will be withheld. (Reporting by Nick Carey, editing by Ian Geoghegan)

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