The proposed FIAT-Chrysler merger may not happen, if the unions representing Chrysler workers don't agree to more wage and benefit concessions.

Says who?

Says FIAT's chief exec, that's who. (So says The Detroit News.)

UPDATE--CAW plans to resume Chrysler talks Monday, according to Reuters and Automotive News.

They reported late this morning that the Canadian Auto Workers union (CAW) said today that it planned to be back at bargaining table with Chrysler on Monday, to resume talks that have been stalled since the beginning of April.

Chrysler has until the end of the month to forge an alliance with Italian automaker FIAT Group Sp.A. to qualify for long-term U.S. and Canadian government aid. FIAT has said a deal hinges on Chrysler securing concessions from its unions in Canada and the United States.

----------------------------------------------------------------

Earlier today, The Detroit News reported that FIAT will walk away from a deal to take a 20-percent stake in Chrysler if the U.S. automaker's unions don't agree to major cost cuts.

FIAT CEO Sergio Marchionne said so in an interview cited by the News that was published in Wednesday's Toronto Globe and Mail.

FIAT and Chrysler are up against an April 30 deadline for FIAT to take a stake in the failing U.S. automaker in exchange for small car technology, but Chrysler first needs concessions from creditors and unions to ink the FIAT deal. If the FIAT alliance isn't finalized by then, the U.S. government has threatened not to provide any more aid and let Chrysler be sold off in pieces.

"Absolutely we are prepared to walk. There is no doubt in my mind," he said. "We cannot commit to this organization unless we see light at the end of the tunnel," FIAT CEO Sergio Marchionne told the Globe and Mail.

Marchionne said there is a 50 percent chance the deal will fail, because of lack of progress in labor negotiations in both the United States and Canada.

"The dialogue is out of sync," Marchionne said. "I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort. .... No one else would put a dollar in. This is the worst condemnation of the viability of this business."

Marchionne said no one wants to remove the U.S. and Canadian autoworkers' unions from the table. "But it will happen if a bankruptcy process drags on. The UAW and the CAW have a unique opportunity here to change the framework of the discussion."

Under terms of the nonbinding agreement between FIAT and Chrysler, FIAT is not committing to inject any cash into Chrysler, nor would it take on any Chrysler debt. Industry experts have said that the absence of any cash beyond an additional $6 billion from the U.S. government--if the FIAT deal goes through--still leaves unanswered how Chrysler can survive until the partnership begins to bear fruit.

Under the propsed merger, Chrysler would benefit from small car technology that it lacks, and Marchionne said that FIAT could start selling its successful remake of the iconic FIAT 500, or Cinquecento in Italian, made in North America as soon as next year. FIAT, while gaining a stake in a company that it hopes one day will regain its value, also plans to relaunch the sporty Alfa Romeo brand in North America. The new Alfa 149, to be unveiled next year, would be built in North America as a successor to the larger Alfa 159, Marchionne said.

Chrysler would also launch its own small car based on the 500 platform, Marchionne said. "Chrysler needs its own Cinquecento, meaning a model that is the remaking of Chrysler," Mr. Marchionne said.

(Courtesy The Detroit News and The Toronto Globe and Mail)