High court won't block Chrysler sale
Jun 9 06:27 PM US/Eastern
WASHINGTON (AP) - The Supreme Court has cleared the way for Chrysler's sale to Fiat, turning down a last-ditch bid by opponents of the deal.
The court said late Tuesday it had rejected a plea to block the sale of most of Chrysler's assets to the Italian automaker. Chrysler, Fiat and the Obama administration had warned that the high court's intervention could have scuttled the sale.
A federal appeals court in New York had earlier approved the sale, but gave opponents until Monday afternoon to try to get the Supreme Court to intervene.
Justice Ruth Bader Ginsburg ordered a temporary delay just before a 4 p.m. deadline on Monday.
Now the court has freed the automakers to complete their deal.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
NEW YORK (AP)?Chrysler returned to bankruptcy court Tuesday to get a judge to approve the termination of 789 dealer franchises, while its plan to partner with Italy's Fiat hung in limbo as the automaker awaited action by the nation's highest court.
The sale of Chrysler's assets to Fiat Group SpA had been expected to close more than a week ago, but Supreme Court Justice Ruth Bader Ginsburg's decision to delay the sale now threatens to derail Chrysler's restructuring plans.
In a brief filed with the Supreme Court Tuesday afternoon, Chrysler and Fiat warned that the deal will terminate if it does not close by June 15. While a new agreement could be negotiated, there's no guarantee that one will be reached or that Chrysler will be able to be jump start its operations after the deadline, they said.
In bankruptcy court, more than 25 attorneys representing hundreds of dealers from across the country argued that little would be gained by terminating their franchises, while Chrysler maintained that the move is a necessary part of its plan to cut costs and quickly emerge from Chapter 11.
Arguments ended early Tuesday afternoon and U.S. Judge Arthur Gonzalez said he would issue his ruling later in the day.
Many of the dealers were selling the last cars on their lots and preparing to shut their doors for good at the end of the day, while others planned to sell used cars or other brands after severing ties with Chrysler.
The Auburn Hills, Mich., automaker has been flying through five weeks of bankruptcy proceedings and appeared all but certain to complete the sale of its assets to Fiat before the June 15 deadline. But Ginsburg issued a stay Monday to review an appeal by a trio of Indiana pension and construction funds which own a small part of Chrysler's secured debt.
The delay may be only temporary. Ginsburg could decide on her own whether to end the stay, or she could ask the full court to decide.
Fiat has the right to walk away from Chrysler after June 15 and leave the struggling U.S. automaker with little option but to liquidate. But a Fiat spokesman said Tuesday that the Italian automaker will not turn its back on a deal despite the Supreme Court stay.
Indiana officials, representing the state funds challenging the Chrysler sale, submitted a short statement to the Supreme Court Tuesday that calls attention to Fiat's statement.
"The Indiana Pensioners respectfully submit 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," the officials said.
Responding to the Indiana funds later Tuesday, Chrysler and Fiat said that the sale agreement will terminate automatically if the sale doesn't close by the deadline, and there's no guarantee that they could negotiate a new deal.
"Given Chrysler's precipitous state, every day past June 15 increases the risk that Chrysler's business will not be able to restart successfully," the company said.
Meanwhile, the Obama administration said in a separate filing that each day of delay consumes more of the financing provided by the government.
"If the closing is delayed by more than approximately 10 days, a sufficient amount of the current commitment of debtor-in-possession financing from the United States will have been consumed as to require the government either to increase its overall funding to the detriment of taxpayers, or abandon its role in the transaction," the administration said.
Production at Chrysler's manufacturing plants remains halted pending the closing of the sale. Chrysler, which says it is losing $100 million every day its plants are closed, said it had no comment until it receives further information from the court.
Chrysler's ability to speed through the bankruptcy process has partially been a result of the involvement of the Obama administration's auto task force, which provided $4.5 billion in financing and helped negotiate a deal between the company's stakeholders.
Under a deal brokered in the days leading up to Chrysler's April 30 Chapter 11 filing, Fiat will receive up to a 35 percent stake in the new company created by the sale, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.
The United Auto Workers will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake.
Meanwhile, the automaker's secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debtholders balked at the deal, saying as secured lenders they deserved more.
The Indiana funds filed an objection to the sale and later appealed to the 2nd U.S. Circuit Court of Appeals and the Supreme Court. They claim the sale unfairly favors Chrysler's unsecured stakeholders such as the union ahead of secured debtholders like themselves.
The funds also are challenging the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority.
The funds hold about $42.5 million, or less than 1 percent, of Chrysler's $6.9 billion in secured debt. They bought it in July 2008 for 43 cents on the dollar.
The appeals come as Congress scrutinizes the Obama administration's restructuring of Chrysler and GM. The Senate Banking Committee said it planned to call Ron Bloom, a senior adviser to the auto task force, and Edward Montgomery, who serves as the Obama administration's director of recovery for auto communities and workers, to a hearing Wednesday.
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Associated Press writers Mark Sherman and Ken Thomas in Washington, Colleen Barry in Milan and Tom Krisher in Detroit contributed to this report.
