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Chrysler has less than 48 hours to negotiate a merger with Italian auto giant Fiat or face the withdrawal of federal funding and almost certain bankruptcy. Though many are still skeptical of the Detroit-based automaker’s survival, developments this week have led some analysts to conclude that Chrysler might yet avoid bankruptcy protection.

The New York Times reports, “The Obama administration is prepared to force Chrysler into bankruptcy by the end of the week unless it gets unanimous consent from a group of banks and hedge funds to retire the automaker’s debt.” But, “The four largest banks in the group — JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs — have agreed to the terms. Together, they hold about 70 percent of Chrysler’s debt.” Some smaller debtholders “are still balking at the terms, setting the stage for a tense final two days in which the fate of Detroit’s third-largest automaker will be decided.”

Kicking Tires comments, “Obviously, details are still coming in, but this is the final piece to the puzzle for Chrysler to meet the government’s May 1 deadline to reorganize. Chrysler has already received concessions from auto unions,” negotiating new agreements with both American and Canadian auto workers this week, “and has a deal with Fiat ready to go once this debt is off the books.”

Also this week, Germany’s Daimler agreed to surrender its 19.9 percent stake in Chrysler in return for no compensation.

Edmunds Inside Line speculates, “Observers may have to wait until the 11th hour to get any definitive word on the fate of Chrysler.”

It remains possible that Chrysler will seek Chapter 11 bankruptcy protection to shed underperforming assets, then merge with Fiat as part of an agreement to emerge from the process.

Some very close to the decision seem to think that bankruptcy is still in the cards. According to Canadian Auto Workers union President Ken Lewenza, the CEO of Fiat is one of them. Lewenza told Reuters that, in a recent conversation, Fiat CEO Sergio Marchionne said to him, “You know Ken, a lot of things can happen in two days, but if I was a betting man, I would suggest Chrysler is going to fall into Chapter 11.”

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