Car giant Chrysler faces bankruptcy

Automobile giant Chrysler looks to be heading for bankruptcy after talks between the US Treasury Department and the financial institutions holding the firm's debt broke down.

The meeting was aimed at reducing the US car manufacturer's $6.9 billion (£4.7bn) deficit and keep the company from folding.

According to reports, while four banks holding 70% of the debt had agreed to write the figure off for $2 billion (£1.37bn), a group of about 40 hedge funds - which control approximately 30% of the business - was looking for a better deal.

A person close to the talks, who has asked to remain anonymous due to the private nature of the meeting, said the Treasury Department finally ended negotiations after the hedge funds were unable to come to an agreement.

The deal's failure means Chrysler will seek bankruptcy protection unless something can be worked out before the government's May 1 deadline.

Copyright © Press Association 2009