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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA bankruptcy judge said Friday that he will rule by today on
whether Chrysler LLC can go forward with its plan sell most of the company to a
group headed by Italy’s Fiat and take a big step toward its goal of a speedy
exit from Chapter 11.
U.S. Judge Arthur Gonzalez’s ruling will likely come on the same day that
fellow U.S.-based automaker General Motors Corp. is expected to follow in
Chrysler’s footsteps and file for bankruptcy protection.
The judge’s Friday evening announcement came after 11 hours of testimony and
arguments that followed marathon sessions the two previous days, during
which everyone from the automaker’s outgoing chief executive to dealers slated
to lose their franchises took the stand.
Gonzalez is widely expected to approve the sale but it’s likely that
attorneys for three Indiana state pension and construction funds that have
aggressively opposed the deal, will appeal the decision and possibly force
Chrysler to further postpone the deal’s closing.
Chrysler claims that any substantial delay could push Fiat to back out if the
deal, since the Italian automaker has set a deadline of June 15 to wrap up a
transaction.
Attorneys for Auburn Hills, Mich.-based Chrysler say that with the help of
Fiat and its technology, a leaner Chrysler could shift more easily to building
smaller, more fuel-efficient cars.
If the sale ultimately goes through, Chrysler could emerge from Chapter 11
bankruptcy protection within weeks, defying observers who said that the company
could linger under court oversight for years. Chrysler filed for Chapter 11 on
April 30.
Chrysler and other supporters of the sale argued during closing arguments on
Friday that the automaker had to make a quick choice between completing a deal
with Fiat with the government’s financial help, or shutting down and selling
itself off in pieces.
Corinne Ball, an attorney for Chrysler, said that in order to make the sale
happen, sacrifices needed to be made by everyone involved, including the
company’s workers, dealers and secured debt holders.
“I really think they’re whining about not getting more,” Ball said.
The Indiana funds are fighting the sale, saying that as secured lenders they
shouldn’t be forced to take such a large loss on their investment. The funds
hold $42.5 million, or about 1 percent, of Chrysler’s total $6.9 billion in
secured debt. They bought the debt in July 2008 for 43 cents on the dollar.
In the days leading up to Chrysler’s filing for bankruptcy protection, most
of the bondholders agreed to a deal that would give them a combined $2 billion,
or 29 cents on the dollar, to erase the debt, but a small number of them balked
and the deal fell through, forcing the company into a reorganization in
bankruptcy court.
Thomas Lauria, an attorney for the Indiana funds, questioned how Chrysler
could give the United Auto Workers union a 55-percent stake in the new company,
especially when it remains unclear just how much that stake is worth.
Lauria accused the federal government of pulling the strings in the case and using
Chrysler as a “guinea pig” ahead of GM’s expected Chapter 11 filing.
“Is this really the way we want troubled companies to be reorganized going
forward?” he asked. “If we let this go, eventually there won’t be any more
lenders.”
Like the funds, many Chrysler dealers, suppliers and former employees filed
objections to the sale and say they are being steamrolled by the exceptionally
quick bankruptcy court proceedings.
Friday’s court hearings got going with testimony from a trio of Chrysler
dealers slated to lose their franchises as part of Chrysler’s restructuring.
Chrysler wants court approval to terminate the franchises of about 789 of its
dealers, calling it a needed cost-cutting measure.
Richard Mealey, president of Birmingham Chrysler Jeep in Troy, Mich., said
that if the judge approves the termination of the dealer franchises, he expects
to lay off most of his 89 employees at the end of next week, with the rest
staying on to keep the body shop open and help wind down the rest of the
business.
“We feel totally rejected, dejected and very, very concerned about the
future,” Mealey said.
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