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How will Chrysler reach its deadline?

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Steve Chiotakis: I mentioned Chrysler at the top, they made progress over the weekend with its unions. All on the heels of a big deadline for some sort of restructuring this week. That leaves the automaker negotiating with creditors — the ones to which it owes nearly $7 billion. On the road to some kind of agreement, there will be no shortage of adrenaline.

Yeah, Fortune Magazine’s Allan Sloan joins us now. Allan, what are all the parties trying to do in this final week?

Allan Sloan: Well, what we’re facing is a game that they play in bankruptcy courts all the time. It’s called Chicken. Do you know the game of Chicken?

Chiotakis: I know it well.

Sloan: Right. Well, some of our audience may be more cultured than you and I are, so I think I ought to explain it. Which is somebody, say Steve, gets in a car and drives toward me. I get in my car, I drive towards him. And the question is, which one of us chickens out and goes in the ditch before we hit . . .

Chiotakis: Yeah, I don’t like the scenario at all, Allan. Hahaha!

Sloan: No, I don’t like it either, especially since I’d probably chicken out right at the beginning. But bankruptcy people are professional chicken players. So what you’re seeing is a lot of chest-pounding and carrying on, both in the Chrysler negotiations, which pits the Treasury against the creditors of Chrysler, and also in a second set of negotiations, which I’m sure we’ll be talking about in a few weeks, which is the General Motors thing where the same game is going on. And GM now actually has a real deadline, because they’ve said we are not going to make a bond payment that’s due at the beginning of June. And that starts the clock ticking where anybody who owns these bonds and doesn’t get paid can pretty much put General Motors into bankruptcy. So that’s gonna have to get settled.

Chiotakis: And so what happens in the end here?

Sloan: Well, I suspect at the end what happens is that there may be a company called Chrysler, but it won’t be owned by the United States, and many of its plants in the United States will close. Ford is cutting and cutting and cutting and may scrape by — I hope it does — and make it without any government help. And GM, it’s a really ugly situation, and you can see where, again, a whole lot of GM facilities are gonna close, they’re gonna employ a lot fewer people, they’re gonna do a lot less borrowing. The only question is whether this happens as part of a bankruptcy or some reorganization outside of bankruptcy court. Which matters to a whole lot of people, but for purposes of our conversation, it doesn’t matter if you’re looking at what happens to the companies.

Chiotakis: All right, Fortune Magazine’s Allan Sloan joining us. Allan, thank you.

Sloan: You’re welcome.

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