U.S. judge hears Chrysler/Fiat deal necessary to avoid liquidation
Chrysler LLC began a second day of testimony Thursday in a bid to convince a bankruptcy judge that a deal with Italian automaker Fiat is the best way to save the company from liquidation.
The automaker is asking U.S. Judge Arthur Gonzalez to approve the sale of the bulk of its assets to Fiat, despite objections from a group of Indiana state pension and construction funds that hold less than one per cent of Chrysler's secured debt.
If the judge agrees to the sale, Chrysler could emerge from bankruptcy protection within weeks.
Gonzalez heard nine hours of testimony Wednesday from Chrysler and Fiat officials that lasted into the evening.
Testimony resumed Thursday morning, with James Chapman, an independent member of Chrysler's board, taking the stand.
The judge is also set to hear from Chrysler CEO Robert Nardelli, followed by arguments from Chrysler and various dissenters. Gonzalez said he was prepared to continue the hearing on Friday if needed.
Attorneys for Chrysler say unloading the company's assets to a group led by Fiat is its only hope to avoid selling itself off piece by piece. They say a leaner Chrysler could shift more easily to building smaller, more fuel-efficient cars.
Deadline to close deal is June 15
But many Chrysler dealers, bondholders and former employees say they are being steamrolled by the exceptionally speedy bankruptcy court proceedings. Fiat could back out if the deal doesn't close by June 15.
The current plan calls for Fiat to bring a handful of its small cars to the U.S. in the coming years, filling one of Chrysler's biggest product gaps and pleasing a White House intent on making the nation's automobiles greener.
Chrysler entered bankruptcy protection with a handful of new vehicles in the works. It plans to begin selling an electric car and have six electric vehicles on the road by 2014.
Even if Chrysler comes out of bankruptcy protection, its challenges are just beginning. Until the Fiat vehicles arrive, it will have to rely on a product lineup that lost billions of dollars last year.
Alfredo Altavilla, Fiat's chief executive for powertrain technologies and head of business development, testified Wednesday that he expects it will take about 18 months to begin producing Fiat vehicles at Chrysler facilities and about 24 months to start producing powertrains for those vehicles in North America.
Some of the strongest opposition to Chrysler's asset sale has come from lawyers representing a pair of Indiana state pension funds and a state construction fund that hold a combined $42.5 million of the company's total $6.9 billion in secured debt.
The funds have said they oppose the sale because it puts the interests of unsecured creditors, such as the United Auto Workers union, ahead of theirs and those of other secured debt holders.