DETROIT (AP) -- The deal for Italian automaker Fiat SpA to take a 35 percent stake in Chrysler LLC will not be finished until after Chrysler submits a restructuring plan to the federal government, a Chrysler official said Friday.
But the official, who did not want to be identified because the automaker is still working on the plan it must provide to the Treasury Department by Tuesday, said Chrysler will show how it can be viable as an independent company as well as with Fiat taking a stake.
Chrysler is living on $4 billion in government loans. The restructuring plan must show how the automaker will repay the money and become viable. If the government approves the plan, Chrysler will get another $3 billion in loans. The Fiat deal is contingent upon that happening, the official said.
The automakers said last month that they have a nonbinding preliminary deal for Fiat to give its small-car technology to Chrysler in exchange for a 35 percent stake in the struggling automaker. Chrysler's current small and midsize vehicle lineup has not sold well, and it lacks a subcompact model that Fiat could provide.
Chrysler has said that Fiat's vehicle architecture and engine technology are worth billions and would allow Chrysler to get small cars to market five or six years faster than Chrysler could on its own. Fiat also would get access to Chrysler's U.S. distribution network and its emissions control and large-vehicle technology.
The official said Chrysler is still negotiating concessions from debtholders and the United Auto Workers union, even with the deadline to file the viability plan with the government only four days away. Negotiations are to continue into the weekend.
General Motors Corp., which also has received government loans to hold off a bankruptcy filing, is working on its own plan under the same deadline. GM has received $9.4 billion in loans and hopes to get another $4 billion when its plan is approved.
Under the terms of Chrysler's loans, the government set a target for the company to swap much of its debt for equity, which will severely dilute the ownership stake of its current owners, Cerberus Capital Management LP and Daimler AG.
Chrysler will negotiate into the weekend with banks that hold its secured debt to swap part of it for equity. The government also wants Chrysler to convert to equity billions in cash payments it must make to a trust that will start paying retiree health care costs next year. The government also will get equity for its loans.
Those moves, coupled with Fiat's potential 35 percent stake, could leave Cerberus and Daimler with combined ownership of less than 10 percent, according to independent auto industry analyst Erich Merkle.
"My understanding is it would be the banks and the UAW that would own the company when they're done. They would be the larger stakeholders," Merkle said.
Currently, Cerberus, a New York private equity firm, owns 80.1 percent of the struggling Auburn Hills automaker, while Daimler, Chrysler's former owner, holds 19.9 percent. Cerberus is negotiating to take the Daimler stake.
Since Chrysler is a privately held company, it's unclear just how much debt the automaker has, but officials have said it is secured debt held by banks. Chrysler is obligated to pay about $9.9 billion into the union trust under the terms of a national contract deal reached with the UAW in 2007. That payment relieves the company of a $16 billion long-term liability for retiree health care.
The union gained federal court approval for the trust and plans to invest the money so it can pay health care costs for current and future retirees. General Motors Corp. and Ford Motor Co. also agreed to similar trusts in their union contracts.
Chrysler spokeswoman Shawn Morgan would not comment other than to say that the company continues to work with its stakeholders.
Both Chrysler and GM must prove they will be able to repay government loans and achieve "positive net present value." That means that the present value of a company's expected net cash flows exceeds the initial investment that must be made in the company.
Ford has borrowed enough cash privately and says it can avoid government loans. Nearly all automakers are reporting dismal sales in what has turned out to be the worst auto sales climate in 26 years.
Chrysler Vice Chairman Jim Press said Thursday that negotiations with the UAW and banks will continue into the weekend. He said full settlements with the stakeholders don't have to be reached until March 31.
Although a Fiat deal would mean Italian company owns 35 percent of the company, it would still create American jobs, justifying the loans, Press said.
With the Fiat deal gaining momentum, Nissan Motor Co. of Japan said Friday it has suspended plans for Chrysler to produce a Nissan pickup truck and Nissan to produce a small car for Chrysler.