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Chrysler seeks approval for Fiat deal
By Bree Fowler |
May 28, 2009, Thursday
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Print Edition
Print Edition
CHRYSLER LLC appeared in court yesterday to ask a bankruptcy judge for permission to sell the bulk of its assets to a group headed by Italy's Fiat Group SpA in the hopes of saving itself from liquidation.
Attorneys for Chrysler maintain that the deal Fiat with is the company's only hope to avoid being sold off piece by piece, but the agreement remains controversial with more than 100 objections to the sale filed by the auto maker's dealers, bondholders, former employees and other groups.
However, if the deal doesn't close by June 15, Fiat could back out.
Auto makers worldwide are struggling as the global recession has reduced demand for new vehicles. United States auto makers 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 trucks and sport utility vehicles.
On Tuesday, Chrysler avoided a possible roadblock to its sale when a US district judge ruled that a legal review of its bankruptcy proceedings was not needed before the sale hearing could take place. Judge Thomas Griesa denied a withdrawal motion from attorneys representing a pair of Indiana state pension funds and a state construction fund.
The funds had argued that a review was needed because of the unprecedented involvement of the US Treasury Department in the case and its use of federal bailout funds for bankruptcy financing.
Last week, attorneys for the funds asked a US judge to postpone the sale hearing in order to give the district court time to rule, but that motion was denied.
Chrysler attorney Thomas Cullen said during Tuesday's hearing that the agreement with Fiat represents the best deal Chrysler could get to save itself, noting that the company also looked to other auto makers and its lenders for help but did not get any.
"The government was our bank of last resort," Cullen said. "We desperately, desperately needed that financing or we would have needed to liquidate."
The funds also have filed a motion objecting to the sale, saying it puts the interests of other parties ahead of those of the funds and other secured debt holders.
When Chrysler filed for bankruptcy on April 30, the government estimated the company would exit bankruptcy in 30 days to 60 days.
Attorneys for Chrysler maintain that the deal Fiat with is the company's only hope to avoid being sold off piece by piece, but the agreement remains controversial with more than 100 objections to the sale filed by the auto maker's dealers, bondholders, former employees and other groups.
However, if the deal doesn't close by June 15, Fiat could back out.
Auto makers worldwide are struggling as the global recession has reduced demand for new vehicles. United States auto makers 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 trucks and sport utility vehicles.
On Tuesday, Chrysler avoided a possible roadblock to its sale when a US district judge ruled that a legal review of its bankruptcy proceedings was not needed before the sale hearing could take place. Judge Thomas Griesa denied a withdrawal motion from attorneys representing a pair of Indiana state pension funds and a state construction fund.
The funds had argued that a review was needed because of the unprecedented involvement of the US Treasury Department in the case and its use of federal bailout funds for bankruptcy financing.
Last week, attorneys for the funds asked a US judge to postpone the sale hearing in order to give the district court time to rule, but that motion was denied.
Chrysler attorney Thomas Cullen said during Tuesday's hearing that the agreement with Fiat represents the best deal Chrysler could get to save itself, noting that the company also looked to other auto makers and its lenders for help but did not get any.
"The government was our bank of last resort," Cullen said. "We desperately, desperately needed that financing or we would have needed to liquidate."
The funds also have filed a motion objecting to the sale, saying it puts the interests of other parties ahead of those of the funds and other secured debt holders.
When Chrysler filed for bankruptcy on April 30, the government estimated the company would exit bankruptcy in 30 days to 60 days.
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