Chrysler’s troubles looked so great even its own executives thought the company was headed for liquidation, however emergency surgery in the bankruptcy courts appears to have saved the patient.

As Caroline Humer and Tom Hals write, the sale of Chrysler’s main business to Italy’s Fiat and other groups looks likely to be sealed by the end of May, taking most of the company out of bankruptcy within just 30 days, hitting the government’s target deadline.

Judge Arthur Gonzalez has been instrumental in driving through the process, quickly rejecting objections from a range of creditors. A few sticking points could still hold up the sale, with a group of Indiana pension funds filing suit in a separate court, but most specialists expect the judge to approve the sale to Fiat at Wednesday’s hearing.

The Fiat deal is an example of what is called a “363 sale” in the bankruptcy world, which is typically done in the first couple of months after a filing. In Chrysler’s case, the sale sped through quickly because Chrysler showed that the 30-day timeline was critical to saving the business. Read an earlier analysis by Caroline here.

Reuters’ Emily Chasan will be sending live updates from the Chrysler bankruptcy hearing, scheduled to begin at 11:00 am on Wednesday. Read her updates on DealZone or follow the DealZone Twitter account.

More:

• Chrysler creditor group asks court to appoint examiner
• Terminated Chrysler dealerships to challenge sale
• Chrysler seeks OK for Daimler, Cerberus settlement
• Full Coverage: The Auto Industry

For weeks, General Motors has been working to prepare its customers, suppliers and employees for the hard landing most analysts see waiting at month end: a bankruptcy filing.

The embattled automaker’s drop dead date is Monday, June 1 when it has $1 billion in bond payments due that it plans to skip.  Five days earlier, on May 27, GM learns how much of some $27 billion in bonds it was able to retire in exchange for its devalued stock.

Analysts and restructuring experts see little chance GM will meet its target of wiping its balance sheet almost clean of bond debt. That would leave one option: a Chapter 11 filing.

There’s another reason that bankruptcy has now become all but certain in the view of most analysts: the drag of too many GM dealers competing against each other for the same shrinking pool of Chevy, Cadillac and Buick shoppers.

As expected, Chrysler LLC used  its bankruptcy ask a federal judge to cut it free of almost 25 percent of its U.S. dealerships. GM is expected to detail its own plans to eliminate about 2,600 dealerships as soon as this week.

Outside bankruptcy, industry executives say GM has no chance to tear up those contracts and walk away.

The backlash has already begun and seems certain to grow bigger.

Civil rights leader Jesse Jackson used an appearance at Ford’s annual meeting to announce that he has already lined up a protest intended to call attention to the economic fallout from a GM bankruptcy.

“If GM goes down, we are going to have a demonstration the first of June in Lansing, Michigan,” he said. “We are going to have mayors and auto workers and civil rights groups and others.”

“We must warn the American people if GM goes into  bankruptcy the impact will be devastating.”

Echoing a line of protest raised by the United Auto Workers, Jackson said he was worried about the loss of GM-related factory jobs and the possiblity of jobs shifting to China as imports increase.

“If they go down, whole cities and towns and state revenue budgets will go down with it,” he said.

With GM’s share price heading toward $1 and Chrysler close to consummating its shot-gun wedding with Fiat, Ford’s raising $1.4 billion through the sale of 300 million shares puts some serious distance between it and the competition.

Having gone this far into the recession without government aid, Ford is making a big show of going green, consolidating its dealer networks and taking the kind of cost-cutting steps that GM is being chased into by the government and that Chrysler is hoping for from its merger with Italy’s Fiat.

If the restructuring moves weren’t enough, Ford chief Alan Mulally (smiling and clapping, left) made sure to hit the right PR notes when detailing how the fresh cash would be used: possibly funding a larger portion of Ford’s retiree obligations.

Given that GM’s latest do-or-die deadline with the Obama administration autos task force is just a couple weeks away, Ford’s going to market now serves more to separate it from its struggling rivals than to address any real funding needs. The company said just last week that its restructuring was on track and that it had sufficient liquidity to fund it, including converting plants and investing in future products.

It’s always wiser to approach the market from a position of strength, so while Ford may not appear to need the money right now, the sorry state of the competition may have made the opportunity too good to pass up.

Deals of the Day:

* Ticketmaster Entertainment said it received the required approval from its lenders for its proposed merger with Live Nation, the world’s largest concert promoter.

* Shinsei Bank and Aozora Bank could announce their plan to merge as early as Wednesday, sources said, a deal that would bring together two money-losing lenders and create Japan’s sixth-largest bank.

* Executives at Citigroup Primerica Financial Services unit are looking to sell the division’s marketing arm, Bloomberg said, citing four people familiar with the matter.

* Printing services provider R.R. Donnelley & Sons Co said it offered to buy the assets and properties of Quebecor World for about $1.35 billion in a cash and stock deal to expand into Canada.

* Mitsubishi UFJ Financial Group Inc’s trust banking unit has decided to cancel its planned $257 million purchase of Citigroup’s Japanese trust bank, Japanese newspapers reported.

(PHOTO: Ford Motor Co. President and CEO Alan Mulally addresses the crowd during a news conference in Wayne, Michigan May 6, 2009. REUTERS/Rebecca Cook)

Under the bondholders’ deal, they would swap a 51-percent stake in a restructured company for $27 billion in debt, a person with knowledge of the plan tells Reuters Detroit Bureau Chief Kevin Krolicki. The deal would give the United Auto Workers union 41-percent in a new General Motors while the U.S. government would not receive an equity stake, according to the person who asked not to be named because the offer had not yet been submitted.

A committee representing GM bondholders will present the alternative plan to the White House task force overseeing the restructuring of GM and Chrysler later today, the person said. GM said this week it was moving ahead with a plan to offer existing bondholders a 10-percent ownership of the restructured automaker. Under the GM plan, the US government would own a combined 89-percent of the new company.

GM Chief Executive Fritz Henderson said on Monday the automaker would file for bankruptcy if bondholders did not swap out of 90-percent of the $27 billion they are owed.

Deals of the day:

* There is “reasonable optimism” that a deal between Fiat and Chrysler could be announced on Thursday, Italy’s industry minister said after talking to Fiat’s top management.

* Korea Development Bank (KDB) is considering raising its stake in GM Daewoo, the South Korean unit of cash-strapped General Motors Corp, officials at the state-run bank said.

* U.S. investor J.C. Flowers is heading for a showdown with the German government by refusing to accept its tender offer for stricken Hypo Real Estate.

* Russian fixed-line operator Comstar has offered to acquire telecom company Synterra for $850 million in equity and cash, including debt, business daily Kommersant reported.

* Credit Suisse will sell a 30 percent stake in an asset management joint venture formed with Woori Finance Holdings back to the South Korean firm, both companies said.

* Anheuser-Busch InBev said it completed the sale of its minority stake in Tsingtao to ASAHI for $667 million.

* Deutsche Telekom plans to combine its German fixed-line and wireless units into a single division to help save costs, it said.

(PHOTO: A General Motors Pontiac sign is seen at an auto dealership in Dearborn, Michigan April 24, 2009. REUTERS/Rebecca Cook)

Chrysler’s biggest lenders and the U.S. government reached a breakthrough framework deal to cut the automaker’s debt by $6.9 billion, but officials say bankruptcy is still a strong possibility with the Obama administration’s Thursday deadline for a comprehensive rescue plan just hours away.

Fiat Chief Executive Sergio Marchionne was quoted by the president of the Canadian Auto Workers union as saying Chrysler would likely enter Chapter 11 bankruptcy for a period of time. But Michigan Senator Carl Levin said, “If they do go into bankruptcy, it would really be in and out.” A source with senior-level knowledge of the restructuring told us that a surgical bankruptcy could be a way, for instance, to address “recalcitrant” lenders.

With Germany’s Daimler AG dumping its 19.9 percent stake in Chrysler and Italy’s Fiat poised to “eventually” own more than a third of the company, European know-how and innovation have never been more important for the U.S. auto industry.

Deals of the Day:

* British education and training company BPP Holdings said it had received a preliminary approach from Apollo Global at 620 pence per share in cash. The approach was at a 70 percent premium to BPP’s closing price on Tuesday valued BPP at 303.5 million pounds ($447 million).

* Australian iron ore miner Fortescue Metals has completed approvals for its equity tie-up with China’s Hunan Valin Iron and Steel Group, the company said.

* Russia’s Aeroflot may agree to buy 49 percent of troubled German airline Blue Wings, Russian Transport Minister Igor Levitin, who is also Aeroflot’s chairman, told Reuters.

* A merger between Shinsei Bank and Aozora Bank is facing difficulties as they were not able to get consent from their major shareholders, Jiji news agency reported. 

(PHOTO: A Chrysler logo is seen atop a New York City car dealership April 27, 2009. REUTERS/Mike Segar)

Tata Motors, which bought Jaguar and Land Rover from Ford earlier this year, may now have to pump at least $1 billion into the brands to keep them alive. That’s bad news for U.S. automakers trying to sell brands.

While auto assets up for sale by U.S. automakers were expected to linger for a while, Tata’s rough road with Jag and Land Rover are likely to keep those assets on the block for much longer.

Tata has agreed to inject “tens of millions” of pounds into the company to tide it over while the government mulls a bailout,  media reports have said. This is in addition to “hundreds of millions” of working capital provided since Tata bought Jaguar Land Rover from Ford in March.

That’s a lot of cash for any automaker. And it’s a lot of cash for an Indian automaker, which makes most of its profit in Indian rupees.

And that’s bad news for U.S. automakers hoping to lure buyers — some from emerging markets — for various assets. As Detroit’s three surviving automakers seek interest for Volvo, Saab, Viper and Hummer, the most likely buyers are Asian automakers. But Tata has its hands full with the two brands it bought from Ford. And Mahindra & Mahindra, another Indian contender, is bound to be discouraged by Tata’s experience. Investment bankers have said that Chinese automakers were waiting on the sidelines to see how the Tata experience works out.

Hummer and Viper have both been on the block for a few months in auctions that have gone on a lot longer than anyone had anticipated.

Part of the problem is that the finacing markets are bad and it’s tough to get a deal done. But another part of the problem — and a larger one perhaps — is that no one is really interested in buying a U.S. auto asset right now.

U.S. vehicle sales in November plunged 37 percent to their lowest level since 1982. The slowdown has spread to Europe and Asia, and Japanese automaker Toyota this week forecast its first-ever loss, showing that no one is immune to the slowdown in auto sales.

It was already going to be a hard sell for U.S. automakers. Now the likelihood of Tata having to pump hundreds of millions of dollars into brands it bought just a few months ago is going to keep buyers at bay for even longer.

Good morning and welcome to Before The BellWe are suspending operations until we can broker a deal in Congress to bailout, er, rescue Wall Street. We shall not publish until the crisis is solved.

Until tomorrow,
Derek Caney
Editor

P.S. Shares were down overnight. Suffice to say that if the market is up, it’s because of optimism about the Senate’s approval of a buyout plan. And if it’s down, it’s because of pessimism about the prospects of the bailout. Tuesday’s action took back more than half of the prior day’s record losses. The Senate is expected to vote on the package tonight.

President Bush, who has been guided by the tenets of small government and the free market for the past eight years, approved $25 billion in loan guarantees to the ailing auto industry, at a cost of $7.5 billion to taxpayers. The guarantees give the automakers access to low-interest loans to help convert their fleet to more fuel efficient vehicles.

The automakers are expected to release their month sales figures today. The average forecast is for U.S. auto sales to drop to a 13.5 million annual rate in September from a 16.2 million rate a year earlier and down from a 13.7 million rate in August.

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