Chrysler to ask court for permission to sell assets to Fiat
The future of Chrysler hangs in the balance Wednesday as it heads to court Wednesday to ask a bankruptcy judge for permission to sell the bulk of its assets to a group headed by Italy's Fiat in hopes of saving itself from liquidation.
Attorneys for Chrysler LLC maintain that the deal with Fiat Group SpA is the company's only hope to avoid being sold off piece by piece, but the agreement remains controversial with more than 100 objections to the sale filed by the automaker's dealers, bondholders, former employees and others.
However, if the deal doesn't close by June 15, Fiat could back out.
Automakers worldwide are struggling as the global recession has reduced demand for new vehicles. But GM and Chrysler have been particularly hobbled by promises to cover the health and pension costs of tens of thousands of unionized retirees — along with recent record-high gasoline prices that reduced demand for their low-mileage trucks and SUVs.
On Tuesday, Chrysler avoided a possible roadblock to its sale when a U.S. district judge ruled that a legal review of its bankruptcy proceedings wasn't needed before the sale hearing could take place.
Judge Thomas Griesa denied a withdrawal motion from attorneys representing a pair of Indiana state pension funds and a state construction fund. The funds had argued a review was needed because of the unprecedented involvement of the U.S. Treasury Department in the case and its use of federal bailout funds for bankruptcy financing.
Chrysler released a statement late Tuesday saying it was pleased with Griesa's decision and looked forward to Wednesday's hearing in bankruptcy court.
Last week, attorneys for the funds asked U.S. Judge Arthur Gonzalez, the bankruptcy judge overseeing Chrysler's case, to postpone the sale hearing in order to give the district court time to rule, but that motion was denied.
Chrysler attorney Thomas Cullen said during Tuesday's hearing the agreement with Fiat represents the best deal Chrysler could get to save itself, noting that the company also looked to other automakers and its lenders for help but didn't get any.
"The government was our bank of last resort," Cullen said. "We desperately, desperately needed that financing or we would have needed to liquidate."
The funds also have filed a motion objecting to the sale, saying it puts the interests of other parties ahead of those of the funds and other secured debt holders.
Glenn Kurtz, an attorney for the funds, accused the government of trying to unfairly speed Chrysler through the bankruptcy process, pushing aside the rights of bondholders.
"The rule of law should apply even if there are adverse social consequences," Kurtz told the court.
When Chrysler filed for bankruptcy on April 30, the government estimated the company would exit bankruptcy in 30 to 60 days. The automaker is nearing the end of the process and is expected to emerge from court protection closer to the 30-day timetable, said a person familiar with the matter. The person was not authorized to speak publicly on the matter and spoke on condition of anonymity.