Chrysler, Italian carmaker Fiat and the Obama administration all told the US Supreme Court Tuesday that the bankrupt automaker's sale needs to be quickly approved before June 15.
But the high court is unlikely to rule immediately on the case because the Justice Department is working on another legal brief, NBC News has learned.
Although a Fiat spokesman said Tuesday in Italy the company would not walk away from the deal if it were not completed by June 15, Fiat's lawyers told the Supreme Court that Chrysler could be forced into liquidation if the sale does not go through by that deadline.
Representing the Obama administration's views, Solicitor General Elena Kagan said a "substantial possibility" exists that Fiat will abandon the deal or insist on materially different terms if the sale does not go through by June 15.
Under the proposed deal, most of the assets of the third-largest US auto maker would be sold to Fiat, a union-aligned trust and the U.S. and Canadian governments.
The sale of Chrysler's assets had been expected to close more than a week ago, but on Monday, Supreme Court Justice Ruth Bader Ginsburg granted a request by bondholders opposing the sale to delay the transaction. That decision sale now threatens to derail Chrysler's restructuring plans.
Attorneys for the Indiana pension funds challenging the sale said in a two-page filing that the "risk of termination by Fiat if the transaction does not close by June 15 no longer provides a basis for driving the timing of these proceedings."
It remained unclear what the next step would be or when it would happen. But many legal experts and an administration official interpreted Ginsburg's action as giving the Supreme Court more time to weigh whether to intervene in the dispute.
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 pension funds asked the Supreme Court over the weekend to stop the sale of Chrysler so they could challenge the deal in an appeal to the nation's highest court.
The court has yet to say whether it would hear that appeal.
The pension funds argued Chrysler's sale would unlawfully reward unsecured creditors ahead of secured lenders, it amounts to an illegal reorganization plan and the U.S. Treasury Department overstepped its legal authority by using financial bailout funds for Chrysler when Congress had intended the money for banks.
In another development, consumer groups said Tuesday they have filed a U.S. Supreme Court appeal challenging the sale on the grounds it would leave Chrysler free of current and future product liability claims.
Five consumer groups and three individuals with pending cases challenged a provision of the sale agreement that releases the new company from pending and future product liability claims involving vehicles sold before the new company's creation.
"This case presents exceptionally important questions," they said in the appeal. They argued that Chrysler could not be sold "free and clear" of current and future product liability claims.
The consumer groups over the weekend filed a separate request with Ginsburg to put the deal on hold while the court considers their appeal.