Fire sale Judge approves Chrysler-Fiat deal
Tuesday 02 June 2009
A judge in New York has approved the sale of most of Chrysler's operations to the Italian car maker Fiat, boosting hopes that the US company could emerge quickly from bankruptcy. The alliance with Fiat is the centrepiece of the Obama administration's "pre-packaged" restructuring of Chrysler, which it announced alongside the bankruptcy filing on 30 April.
At the time, many bankruptcy experts were sceptical that Chrysler could emerge from Chapter 11 insolvency in the 30 to 60 days that the President's team predicted, but challenges to key parts of the restructuring deal from Chrysler dealerships and bondholders have been swiftly dealt with by Arthur Gonzalez, the judge presiding over the bankruptcy court.
"Any material delay would result in substantial costs in several areas, including the amounts required to restart the operations, loss of skilled workers, loss of suppliers and dealers who could be forced to go out of business in the interim, and the erosion of consumer confidence," Judge Gonzalez said in his ruling approving the deal. "In addition, delay may vitiate several vital agreements negotiated amongst the debtors and various constituents."
Fiat will own 20 per cent of the new Chrysler when it emerges from Chapter 11 protection, and will help the historic US car maker to develop new, fuel-efficient vehicles. The alliance will also give Fiat access to Chrysler's US dealer network. However, three Indiana pension funds which invested in Chrysler debt have appealed against the judge's decision to approve the sale.
President Obama expressed optimism about the rest of the bankruptcy process, following the judge's ruling late on Sunday. "The sale transaction paves the way for the new Chrysler to successfully emerge from bankruptcy as a new, stronger, more competitive company for the future," he said.
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