Negotiation Research, Negotiation Case Studies April 24, 2009

Chrysler's Deadline Next Week?

Will a deadline help Chrysler negotiations?

Chrysler is the midst of a tough negotiation that pits the carmaker against its creditors, the Italian automaker Fiat, the United Auto Workers (UAW) and also has the U.S. Government playing a role. The government has imposed a deadline of April 30for a deal to be reached. This means that the carmaker has only a few days to reach an accord and avoid a Chapter 11 bankruptcy. At stake is $6 billion from the government, which would be in addition to the $4 billion in loans it already extended to Chrysler.

Deadlines always increase the pressure to close a deal. In some cases, negotiators don’t know if a deadline is real and whether the other party is just trying to force a deal. Dr. Karrass advises you to be skeptical of deadlines in negotiations. However, he cautions, there is also a risk in not believing in a deadline, especially if it turns out that the deadline is real. In this case, the government has imposed a very real deadline on Chrysler.

The Agence France Presse reported yesterday that the Chrysler negotiations have gone into high gear because of the impending deadline. http://www.google.com/hostednews/afp/article/ALeqM5h0aZkvaukxQboyJU6uRLR9WxMvfA

A deal that would avoid bankruptcy for Chrysler is a very complex restructuring of the company’s debt, involving four major US banks. Fiat would agree to invest cash, but the Italian company seems reluctant to do this.

Today’s New York Times is reporting http://www.nytimes.com/2009/04/24/business/24chrysler.html?_r=1&hp that the US Treasury will direct Chrysler to prepare a Chapter 11 filing. It would seem that the government does not think Chrysler can reach a deal before April 30th.

Will the deadline force all parties to reach a deal? Will Chrysler have to go into Chapter 11, and if so, will there still be a deal with Fiat?