Chrysler Sale to Fiat-Led Group Is Delayed by Supreme Court

A US Supreme Court justice granted Monday a request to put on hold the sale of bankrupt automaker Chrysler to a group led by Italian carmaker Fiat.

Supreme Court Justice Ruth Bader Ginsburg, in a one-sentence order, said the orders of the bankruptcy judge allowing the sale "are stayed pending further order of the undersigned or of the court."

AP

Ginsburg acted as a 4 p.m. deadline from a U.S. appeals court in New York was due to expire.

• Read the Supreme Court's Chrysler Order

The appeals court order would have allowed Chrysler to proceed with its sale to Fiat, a union-aligned trust and the U.S. and Canadian governments.

It was not clear if Ginsburg's order was designed to give the high court more time to consider the dispute.

Her order made no mention of when briefs in the appeal would have to be filed or whether the Supreme Court would hear the underlying legal challenge to the sale.

Indiana pension funds and consumer groups had asked the Supreme Court on Sunday to stop the sale of Chrysler while they challenged the deal.

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“It’s the first time in American history where secured creditors were not treated as secured creditors,” Richard Mourdock, Indiana's state treasurer said on CNBC shortly after the delay was announced. "“We don’t think the administration can egregiously and arbitrarily throw 150 years of bankruptcy law out the window without process of law.”

The Obama administration, earlier on Monday, urged the Supreme Court to allow the sale, saying that blocking the deal would have "grave consequences."

Solicitor General Elena Kagan of the U.S. Justice Department, the administration's lawyer before the high court, said in a written argument that blocking the sale could force Chrysler's liquidation.

Sheryl Toby, a bankruptcy attorney in Michigan, said, "I don't think this gives you an indication that they're ruling on the merits, but she (Ginsburg) is maintaining the status quo at least to determine whether to consider the appeal."

The Chrysler case could set a precedent for General Motors , which is using a similar quick-sale strategy in its bankruptcy in New York.

The Indiana pension funds argued that the sale of Chrysler unlawfully rewards unsecured creditors ahead of secured lenders and amounts to an illegal reorganization plan, and that the U.S. Treasury Department overstepped its legal authority by using bailout funds for Chrysler when Congress intended the money for banks.

“I cannot imagine a majority opinion coming out of the Supreme Court that says ‘Oh, that thing about secured creditors? We really didn’t mean that,'" Indiana Treasurer Mourdock said in the CNBC interview. "If they send that message to the capital markets I think it's going to do nothing other than force billions and billions of dollars into foreign markets.”

“Economic markets, capital markets crave stability, and when you have an administration that keeps changing the rules, that’s not stability,” he added. “It sends a fear throughout all of the markets.”

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