Bankruptcy Imminent for Chrysler

Chrysler is driving ever closer to bankruptcy, the Wall Street Journal, Business Week, and the New York Times report this morning, leading off their business coverage. The carmaker could file for Chapter 11 as early as next week, regardless of whether or not it cinches a deal with Fiat and/or its demanding bondholders, the WSJ says, citing sources. An auto-industry analyst tells Business Week that a Chrysler bankruptcy is a "95% likelihood." It is the Obama administration that is forcing the bankruptcy plan on Chrysler, the NYT reports, citing sources who say the Treasury has convinced the United Auto Workers that Chapter 11 would preserve union members' pensions and benefits. Chapter 11 would also open the door wider for Fiat "to complete its alliance with Chrysler while the company is under bankruptcy protection," the NYT writes.

Fiat's Sergio Marchionne is a busy man these days. Even while the Fiat CEO continues to negotiate an alliance with the much larger Chrysler, Marchionne is also zeroing in on General Motors' European business, the Financial Times writes. Fiat is one of seven contenders kicking the tires on GM (GM) Europe, a division that includes popular European brands like Opel and Vauxhall, the newspaper writes.

Stung by a slump in global PC demand, Microsoft (MSFT) stunned the tech world on Thursday, reporting its first quarterly revenues decline in its 23-year operating history as a public company. The big culprit was a remarkable 16 percent drop in sales in its core Windows business, the WSJ writes. The FT goes back even further, calculating Microsoft's growth has for the first time declined after 34 years, "bringing an end to one of the most dramatic uninterrupted growth stories in modern business." A blip perhaps? Nope. The forecast is for more pain ahead in the tech sector. "We remain more cautious than most about the state of the economy," Chris Liddell, Microsoft's finance chief, says in the FT. Moving to another troubled tech star now, MySpace is expected to officially name its new CEO as early as today, according to buzz in the tech press. Former Facebook Chief Operating Officer Owen Van Natta is widely tapped as the man to run MySpace. The WSJ points out that Van Natta is a techie with "deep roots" in Silicon Valley and a touch for making the big deal. It was Van Natta who "helped shepherd an investment by Microsoft Corp. and jump-started Facebook's efforts to generate money," the newspaper writes.

Did the U.S. government overstep the law in its desperate brokering of the Bank of America-Merrill Lynch merger? That's what New York State Attorney General Andrew Cuomo has charged federal regulators with uncovering after BofA CEO Kenneth Lewis disclosed that Federal Reserve chief Ben Bernanke and former Treasury Secretary Hank Paulson "insisted that the merger be completed, despite the discovery of billions of dollars in new losses at Merrill," the WSJ says. Furthermore, the NYT writes, Lewis has testified that he felt pressured "to withhold material information about government assistance from shareholders" and that Bernanke and Paulson "feared a systemic risk if the deal was not completed, and even threatened to remove management if it balked." Cuomo said he is concerned that in protecting taxpayers' interests, the Fed and Treasury could have driven BofA (BAC) to break federal securities regulations by not disclosing Merrill’s (MER) losses to shareholders.

To another type of banking pressure now: The NYT reports that the nation’s 19 largest banks are set to find out how they did in the government's so-called stress test and "which among them will need another bailout from the government or private investors." Despite having posted some decent first-quarter earnings, many banks are set for a new roller-coaster ride in the coming weeks as "investors scramble to do their own assessment of the financial industry’s strongest and the weakest players," writes the NYT. The events of the last nine months continue to reshape America's banking landscape. The WSJ reports that Morgan Stanley (MS) is contemplating a major internal revamp of its biggest proprietary-trading desk, known as Process Driven Trading, "including spinning it out into a hedge fund or opening up the unit to outside investors." The bank worries that some of its top traders will be driven away by potential government restrictions on pay at firms receiving government aid through the Troubled Asset Relief Program—and that new hiring restrictions for banks taking TARP money will stop them from hiring the brightest foreign talent.

It may not have been struck precisely on Earth Day, but a new low-carbon fuel standard for California motorists approved on Thursday is being hailed by the Los Angeles Times as a direct shot against "the oil industry and its impact on global warming." The new fuel standard is indeed ambitious, aiming "to slash the state's gasoline consumption by a quarter in the next decade" and to "expand the market for electric and hydrogen-fueled vehicles and jump-start a host of futuristic biofuels to replace corn-based ethanol, as well as oil." Gov. Arnold Schwarzenegger says 16 states are looking to copy the plan in some way and that there is already talk in the White House of adapting it as a "national standard."