Fiat will walk away from a proposed partnership with Chrysler unless unions at its American and Canadian plants agree to cut labor costs, the Italian automaker's CEO said on Wednesday.
In an interview with the Toronto daily Globe and Mail, Sergio Marchionne said Fiat would seek other international partnerships if negotiations with Chrysler's unions and lenders fail.
''There is no doubt in my mind. We are prepared to walk,'' the Canadian-trained executive said.
Fiat and the Detroit No.3 are racing against the clock to strike a deal by May 1, the deadline the Washington administration of President Barack Obama set to receive federal bail-out funds which are essential for Chrysler to avoid bankruptcy.
The deal, which has Obama's support, would give Fiat an initial 20% stake in Chrysler in exchange for its cutting-edge green and small-car technology.
The Turin automaker would also have access to Chrysler's plants and dealerships in order to allow it to return to the American market, initially with Alfa Romeo and the trendy Fiat 500 city car.
Chrysler, in turn, would have access to Fiat's facilities in Europe and Latin America.
However, the deal hinges on lenders accepting stock equity for debt and unions agreeing to work under the same conditions as in US plants making German and Japanese cars, located in states where union strength is lower.
Workers in these states make about 25% less than those in Detroit or Canada.
According to Marchionne, there is currently a 50-50 chance an accord will be struck.
If there is no deal, the 56-year old Fiat CEO said Chapter 11, bankruptcy protection, would remain an option for Chrysler, but that it also faced the risk of Chapter 7, liquidation.
In regard to press speculation that, should a partnership be formed, he may run both Fiat and Chrysler, the Canadian-trained executive said ''that's possible, but the title isn't important''.
''What's important is that they hear me. It's possible that I will have to divide my time between running Fiat and running Chrysler,'' he added.
