Political allies of the U.S. auto industry expressed serious concern on Wednesday to senior White House officials about possible carmaker bankruptcies with Chrysler LLC facing an April 30 deadline to cement an alliance to avert probable insolvency.

The meeting, involving both Michigan senators and eight Democratic representatives from the industry's home state, occurred as intense alliance talks continued involving Italy's Fiat Spa , Chrysler and unions in the United States and Canada.

In a joint statement, the lawmakers said they told White House Chief of Staff Rahm Emanuel and top economic adviser Larry Summers they were concerned about the risk of bankruptcies at Chrysler and General Motors Corp.

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

The administration is working diligently to help these companies reach agreement with all of their stakeholders, the statement said.

Chrysler, about 80-percent controlled by Cerberus Capital Management , has been told by the administration's autos task force that it must reach a deal with Fiat and obtain cost cuts from debt holders and its unions to continue operating under emergency U.S. government loans.

Many analysts expect the Chrysler, Fiat talks to go right down to the wire, a view also held by federal officials who participated in Wednesday's meeting, according to one person with knowledge of the discussions.

A Fiat spokesman said on Wednesday that talks with Chrysler were totally open and it had no timetable for them.

The United Auto Workers said talks were ongoing between the union and Chrysler.

We are continuing to work toward an agreement that will be in the best interests of Chrysler workers, retirees, and the communities where the company does business, UAW President Ron Gettelfinger said in a statement.

Bruno Vitali, an official with Fim-Cisl, a metal workers union, told Reuters the UAW was strongly motivated to reach an agreement before the end of April.

In Canada, Chrysler said it was in round the clock discussions with the Canadian Auto Workers union. Chrysler says its Canadian hourly wage costs are above $70 per hour compared with less than $50 under the terms of a still-pending deal with the UAW.

GM BOND PAYMENT

The government has directed Chrysler and GM to cut debt levels and strike concessions with unions. GM has until June 1 to win givebacks.

GM said on Wednesday it was unlikely to make a $1 billion debt payment due June 1 because it expects to be restructuring through a voluntary exchange or bankruptcy court by that point.

The automaker has about $28 billion of bond debt to restructure and must win reductions in labor costs and rework the funding of a healthcare trust for union retirees.

A failure by GM or Chrysler to obtain concessions could lead to bankruptcy. In the case of Chrysler, executives have said liquidation would be the likely result.

Auto executives and the industry's political allies have long warned that the economic consequences of a bankruptcy by one of the major automakers could have severe and wide-ranging consequences for the U.S. economy.

Representatives from the National Automobile Dealers Association are scheduled to meet with autos task force members on Thursday in Washington and plan to argue that bankruptcy should not be an option for GM.

Separately, Michigan Gov. Jennifer Granholm made a public plea to banks that hold a large portion of the $7 billion secured first-lien loan at Chrysler to take a bigger haircut than they have offered to help the automaker avoid failure.

Should a bankruptcy be necessary for either GM or Chrysler, Michigan Attorney General Mike Cox wants the automakers to make that filing in the U.S. Bankruptcy Court located in the state.

Cox, in letters to GM Chief Executive Fritz Henderson and Chrysler Chief Executive Bob Nardelli on Wednesday, asked to meet with the CEOs and before any bankruptcy filing.

Any potential filing outside the state of Michigan seems bizarre: more importantly, such a filing would inconvenience and unfairly impact the vast majority of your creditors who are located in Michigan, Cox said.

Elsewhere, plunging profit at Volkswagen , slumping sales at PSA Peugeot Citroen

and job cuts by Swedish truck maker Volvo on Wednesday highlighted the dire state of Europe's automotive industry.

The British government said it plans a scheme to give motorists a 2,000 pound ($2,914) discount on buying a new car when trading in a vehicle more than 10 years old.

In Asia, China's commerce ministry also said it would expand a subsidy to encourage the replacement of older vehicles.

(Additional reporting by Matthias Blamont, Philipp Halstrick, Aileen Wang, Alan Wheatley, Ben Harding and Manuel Maria Ruiz, Niklas Pollard, Mark Potter and Oskar von Bahr, Gilles Castonguay, Soyoung Kim, Poornima Gupta and Kevin Krolicki; writing by David Bailey; Editing by Marcel Michelson, David Holmes, Matthew Lewis and Carol Bishopric)

($1 = 0.7738 euro) ($1=.6863 Pound)

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