Chrysler In Court, Makes Case To Sell Assets To Fiat
The future of Chrysler hung in the balance Wednesday as it made its case in bankruptcy court 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 maintain that the deal with Fiat Group SpA, which is being pushed by President Barack Obama's administration, is the company's only hope to avoid being sold off piece by piece.
But the proposed sale remains controversial with hundreds of objections filed by the automaker's dealers, bond holders, former employees and others.
If the deal goes through, Chrysler says it will be able to emerge from court protection a leaner and stronger company with the resources needed to produce the small, fuel-efficient vehicles now craved by the U.S. market.
But if the deal doesn't close by June 15, Fiat could back out, leaving Chrysler with no other option but to shut down.
Attorneys, staff members and media packed the Manhattan courtroom and an overflow room in the hours leading up to Wednesday's hearing, bringing in boxes of documents and cases of bottled water in preparation for what was expected to be a long day and potentially a long night.
Of the 337 objections filed with the court, most had been resolved or deferred before the start of Wednesday's hearing.
About 200 of them were filed by suppliers challenging the "cure" amounts Chrysler has said it will pay them for prebankruptcy claims. Those claims have been deferred to a separate hearing.
Of the remaining objections, 61 were related to production and supplier issues, with most of them resolved. Another two dozen outstanding objections were filed by Chrysler retirees and former employees.
A group representing hundreds of Chrysler dealers slated to lose their franchise agreements in connection to the sale -- along with several individual dealers -- have also filed an objection.
Some of the strongest opposition on Wednesday came from attorneys representing a pair of Indiana state pension funds and a state construction fund that own Chrysler bonds.
The attorneys, who previously represented another group of dissident Chrysler bond holders, spent several hours questioning Chrysler officials about their actions leading up to the automaker's deal with Fiat.
Tom Lasorda, who served as Chrysler's vice chairman and president before retiring after the automaker went into Chapter 11, was cross-examined by an attorney for the funds for more than an hour about Chrysler's search for a global partner and how the deal with Fiat came to be reached.
"There was nobody out there that was willing to provide a cash infusion," Lasorda said of Chrysler's search for a partner. "But Fiat brought technology and platforms that were just as valuable or even better."
Early on in the hearing, Judge Arthur Gonzalez denied a motion by the Indiana state funds' attorneys for a continuance to allow them more time to prepare for the sale hearing.
Meanwhile, rival U.S.-based automaker General Motors moved a step closer toward its own bankruptcy filing after a rebellion by its bondholders forced it to withdraw a plan to swap bond debt for company stock.
Detroit-based GM has until Monday to complete a government-ordered restructuring that includes debt reduction, labor cost cuts and plant closures.
But a Chapter 11 reorganization is likely after the company said its offer to exchange $27 billion in unsecured debt for 10 percent of the company's stock had failed.
GM has received $19.4 billion in federal loans. GM said its board will meet to decide its next step. 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.