Judge won't delay Chrysler sale

May 21, 2009|Bree Fowler, Associated Press

NEW YORK - A bankruptcy judge denied a motion from a group of Indiana state pension funds to delay the proposed sale of most of Chrysler's assets, saying its plan to challenge the legality of the sale in another court wasn't enough of a reason.

Judge Arthur Gonzalez said yesterday the group failed to show it would suffer irreparable harm, while noting that an expedited sale is key to Chrysler's survival.

Chrysler plans to sell most of its assets to a group led by Fiat Group SpA, of Italy, and form a new company, leaving behind many liabilities and costs that sent it into bankruptcy protection. A sale hearing is scheduled for next Wednesday, with the deal expected to close 30 days later. Without the sale, the government is unwilling to offer the financing the company needs to restructure itself.

The Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust, and Indiana Major Moves Construction Fund objected to the proposed sale, saying the deal as currently structured gives preferential treatment to other stakeholders while ignoring the needs of Chrysler's secured lenders.

The group wants a US District Court judge to decide whether the sale of assets to Fiat is legal.

Thomas Lauria, an attorney for the pension funds, said such a review is needed given the unprecedented involvement of President Obama's administration in the case. "It's not just any old bank that's funding these transactions, it's the US government," he said.

Chrysler attorneys argued a delay would hurt the firm. They said the issues brought up by the pension group should be dealt with in US Bankruptcy Court.

Earlier yesterday, Gonzalez gave final approval to a Chrysler motion that it be allowed to use $4.96 billion in government loans designed to keep the automaker going until the sale to Fiat goes through. Gonzalez had given interim approval for the use of part of the government's $4.1 billion in financing. Chrysler also had use of $400 million in cash.

Also yesterday, the company said Robert Kidder, a former consultant who once worked for Ford Motor Co., will become Chrysler Group's chairman once it emerges from bankruptcy and completes the Fiat merger.

He will succeed Bob Nardelli, who is stepping down as chairman and chief executive. Fiat chief executive Sergio Marchionne is expected to assume management control of Chrysler.