Chrysler LLC’s future appears to rest solely in the hands of Fiat Auto Group decision-makers, as resolutions to a bondholder holdout and labor-cost negotiations appear imminent.

A source with knowledge of the situation tells Ward’s an agreement is expected before Thursday between Chrysler, the U.S. Treasury Dept. and a group of small-scale creditors that control 30% of the struggling auto maker’s debt.

The remaining 70% is held by a handful of investment houses, such as JPMorgan Chase and Co. and Goldman Sachs Inc. These majority lenders reportedly have already signed off on a deal that would forgive Chrysler some $6.9 billion in debt in exchange for $2 billion in cash.

A bondholder truce, coupled with tonight’s expected ratification of concessions by rank-and-file members of the United Auto Workers union, sets the stage for Fiat to help Chrysler meet the Obama Admin.’s May 1 deadline for emergency financing.

However, there are persistent reports the White House is prepared to force Chrysler into bankruptcy. The Wall Street Journal reports President Obama will address the issue tomorrow morning and two versions of his speech are being prepared – one outlining a bankruptcy scenario.

The White House has said it would not provide aid to Chrysler unless the auto maker found a partner to help it weather the global economic meltdown. Though Fiat CEO Sergio Marchionne repeatedly has touted the prospects of an alliance with Chrysler, neither auto maker has confirmed a partnership deal has been reached.

This despite news reports Fiat will announce an agreement tomorrow.

“We are looking at issuing a statement late Thursday,” Fiat spokesman Richard Gadeselli tells Ward’s, giving no hint about the statement’s message.

Discussions between the two auto makers began in mid-2008 and intensified earlier this year. Talks evolved into a proposal that would see Fiat acquire an initial 20% stake in Chrysler, along with an option to acquire an additional 15% in the future.

In exchange, Chrysler would get immediate access to small-car platforms and advanced powertrain technology that promises to improve its competitiveness in a market trending toward vehicles that promise higher fuel economy.

Chrysler’s current lineup is weighted toward less-thrifty light trucks.

Vice President Joe Biden tells reporters today in a teleconference the situation is up in the air.

“I’m not prepared to predict what that outcome will be,” Biden says, according to The Detroit News. “I do believe it's within Chrysler's capacity that either through this reorganization on their own and tying up with Fiat, and/or an orderly reorganization in bankruptcy, to survive and come out of this.”

Biden says while Detroit auto makers are facing tough times, he’s confident the U.S. auto industry will rebound.

However, he quips, he is “not prepared to bet my daughter’s graduate-school tuition” that Chrysler or General Motors Corp. will meet their respective deadlines.

GM also is on the brink of bankruptcy. The Obama Admin. has said financial aid for GM is contingent on the submission of a viable business plan by June 1.

The UAW concessions, which include the elimination of scheduled bonus and lump-sum payments, mirror those approved by the Canadian Auto Workers union on the weekend.

“We stepped up to the plate, and we’ve done our part,” UAW President Ron Gettelfinger says in a statement. “We would call on all the other stakeholders to do the same thing, and hopefully we can get this thing concluded.”

Meanwhile, smaller bondholders at GM held a demonstration outside the auto maker’s massive research and development complex in Warren, MI, a suburb of Detroit earlier today. The group says it wants its voice heard during negotiations between the government and the big investment banks that are holding most of the $27 billion in debt GM needs to convert into equity or face bankruptcy.

“We are here today to hear from the silent sufferers, Main Street America, the small bondholders who stand to lose the most," says Jim Fouts, who as mayor of Warren would see his city devastated by GM bankruptcy.

"The treatment of the small bondholders is fundamentally un-American. These bondholders are seniors and retirees that risked their life savings and our now left out in the cold. GM's bankruptcy will truly hurt everyone.”

The group, which bills itself as “The GM Main Street Bondholders,” claims nearly 25% of GM bonds are held by average citizens facing a wipeout of their savings in a GM bankruptcy.

But under the terms GM proposed last week – the offer would trade 225 share of GM stock for every $1,000 worth of debt owned – average citizens would be left with “pennies on the dollar,” the group says.

A reverse stock split planned by the auto maker to account for shares the UAW and taxpayers would own in GM would further dilute their investment.

“Small bondholders feel like they don't have a voice in this debate,” Fouts says in a statement released by the group ahead of their rally.

– with Byron Pope and James M. Amend

emayne@wardsauto.com