Chrysler is racing to agree a viable restructure with creditors, Fiat, the US Treasury and other stakeholders with just a week to go to the government’s deadline.

Late last night, the treasury proposed that banks and other lenders accept 22% of the US$6.9bn they are owed, plus a 5% stake in Chrysler, the Wall Street Journal reported, citing unnamed sources.

That was up from an earlier treasury proposal – rejected by the lenders – that creditors receive 15% of the debt and no Chrysler stock, Agence France-Presse (AFP) said.

The creditors, led by four major banks, had countered with a proposal to receive 65% of the debt, plus 40% of Chrysler and a seat on the board, the WSJ said.

Fiat was also asked to invest cash in the automaker. AFP noted that, though Fiat had agreed in principle to provide Chrysler with technology, it apparently has been reluctant to pump cash into Chrysler ahead of a possible liquidation.

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The banks’ stance has led to pleas from politicians in Michigan, home state of the struggling US auto industry.

Democratic representative Gary Peters told AP Chrysler’s creditors -JP Morgan Chase, Citigroup, Goldman Sachs and Morgan Stanley, plus other investors – have not bargained in good faith.

“This is not a serious counter offer. These debt holders were offered fair market value for their debt, and the banks have responded by asking for a windfall,” Peters told AFP.

“It is extremely disappointing that while other stakeholders have agreed to work with president (Barack) Obama to advance Chrysler’s restructuring, financial institutions that have already taken billions of dollars in taxpayer support are refusing to do the same,” he added.

Peters added that the offer was an affront to taxpayers and “the many thousands of Chrysler employees and retirees whose livelihoods hang in the balance of the outcome of these negotiations.”

Michigan’s Congressional delegation and state governor Jennifer Granholm are also attempting to use their political influence to keep both Chrysler and General Motors intact, the AFP report said.

The state’s eight Democratic congressmen and the senators met with White House chief of staff Rahm Emanuel and Obama’s chief economic adviser Larry Summers on Wednesday at the White House to discuss the ongoing restructuring of Chrysler and GM.

“With the deadline for Chrysler set for 30 April, we discussed the positive opportunity presented by the alliance with Fiat and our commitment to pursuing that result,” the delegation said in a statement after the meeting.

“We spoke frankly about our very serious concerns about bankruptcy for Chrysler and GM, and the administration spoke frankly about their continued efforts to see Chrysler and GM emerge from restructuring through an out-of-court process.”

The delegation said the government was “working diligently” to avoid bankruptcy, but that “the administration and the companies must continue to prepare contingency plans to avoid liquidation or a protracted restructuring process should the ongoing negotiations for out-of-court resolution fail.”

AFP noted that Chrysler has yet to reach a new agreement with both the United Auto Workers in the US and the Canadian Auto Workers ahead of next week’s deadline.

UAW President Ron Gettelfinger said on Wednesday that talks with Chrysler and Fiat were ongoing but, contrary to some media reports, no agreement had been finalised.

“We are continuing to work towards an agreement that will be in the best interests of Chrysler workers, retirees and the communities where the company does business,” Gettelfinger told AFP.