A bankruptcy judge in the United States will rule tomorrow on whether Chrysler LLC can go forward with its plan to sell most of the company to a group headed by Italy's Fiat, and so emerge from bankruptcy protection.
Judge Arthur Gonzalez's ruling is likely to come as fellow US-based car-maker General Motors follows Chrysler and files for bankruptcy. The judge's announcement comes after 11 hours of testimony and arguments and two days of marathon sessions during which everyone, from the car-maker's outgoing chief executive to dealers threatened with losing their franchises, took the stand.
Judge Gonzalez is expected to approve the sale but it is likely that lawyers for three Indiana state pension and construction funds, which have aggressively opposed the deal, will appeal and possibly force Chrysler to further postpone it. Chrysler claims any substantial delay could push Fiat to back out because it has set a 15 June deadline. The Michigan-based firm says that, with Fiat's technology, a leaner Chrysler could convert more easily to building smaller, more fuel-efficient cars.
If the sale ultimately goes through, Chrysler could emerge from bankruptcy protection within weeks, defying observers who said that the company could linger under court oversight for years. Chrysler, and other supporters of the sale, said during closing arguments that it had to make a quick choice between completing a deal with Fiat, with financial help from Washington, or closing 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," Ms 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 $42.5m (£26m), or about 1 per cent of Chrysler's total $6.9bn (£4.3bn) in secured debt. They bought the debt last July for 43 cents on the dollar.
In the days leading up to Chrysler filing for bankruptcy, most of the bondholders had agreed a deal that would give them a combined $2bn, or 29 cents on the dollar, to erase the debt. But a small number of them hesitated and the deal fell through, forcing the company into a reorganisation in bankruptcy court. Thomas Lauria, a legal representative for the Indiana funds, questioned how Chrysler could give the United Auto Workers union a 55 per cent stake in the new company, especially when it remains unclear just how much that stake is worth.
Mr Lauria accused the federal government of pulling the strings in the case and using Chrysler as a "guinea pig" ahead of GM's expected bankruptcy filing. "Is this really the way we want troubled companies to be reorganised?" 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 steamrollered by the speedy bankruptcy proceedings. Friday's hearings began with testimony from three Chrysler dealers set to lose franchises as part of the restructuring. Chrysler wants court approval to terminate the franchises of about 789 dealers as necessary cost-cutting.Reuse content