High court asked to block Chrysler sale

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By Sean Lengell

Three Indiana pension funds and a collection of consumer groups Sunday asked the Supreme Court to block the sale of Chrysler to Italy's Fiat, threatening a major component of President Obama's plans to restructure the nation's troubled automotive sector.

An appeals court in New York approved the sale Friday, but gave objectors until Monday afternoon to convince the Supreme Court to intervene.

Auburn Hills, Mich.-based Chrysler LLC wants to sell the bulk of its assets to a group led by Italy's Fiat Group SpA as part of its plan to emerge from bankruptcy protection.

The emergency requests were sent to Justice Ruth Bader Ginsburg, who handles such matters from New York, where the case originated. She can act on her own or refer it to the entire court.

Federal bankruptcy Judge Arthur Gonzalez on May 31 approved the sale of most of Chrysler's assets to Fiat.

The judge said in his ruling that a speedy sale was needed to keep the value of Chrysler from deteriorating and would provide a better return for the company's stakeholders than if the country's third-largest automaker had been forced to liquidate

But the Indiana State Police Pension Fund, the Indiana Teachers Retirement Fund and the state's Major Moves Construction Fund argue that the sale unlawfully rewarded unsecured creditors, such as the union, ahead of secured lenders.

Attorneys for the funds also questioned the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing.

The funds hold about $42 million of Chrysler's $6.9 billion in secured loans.

Chrysler had argued that it would be forced to sell its assets piece by piece unless the sale to the Fiat Group SpA was approved.

Mr. Obama has pushed for Chrysler and fellow Detroit car maker General Motors to file for bankruptcy in a drastic attempt to restructure and resurrect the deeply troubled U.S. auto industry.

As part of Chrysler's restructuring plan, a United Auto Workers retiree health care trust would receive a 55 percent stake in the new company, while Fiat would get a 20 percent stake that can increase to 35 percent.

The remaining 10 percent of the company would be owned by the U.S. and Canadian governments. Ottawa became involved because a significant portion of the Chrysler work force is Canadian.

The Chrysler case also could set a precedent for General Motors, which is using a similar quick-sale strategy in its bankruptcy in New York.

In the deal with GM, which filed for bankruptcy last week, the Treasury Department will hold an initial stake of 60 percent in GM.

In the days leading up to Chrysler's Chapter 11 filing, the automaker struck a deal with the majority of secured lenders to give them $2 billion in cash, or 29 cents on the dollar, to erase the $6.9 billion in debt. But some of the debt holders protested, and the automaker was forced to file for bankruptcy protection April 30.

Chrysler -- which has produced such iconic American "muscle cars" as the Plymouth GTX and Road Runner, as well as the Dodge pickup-truck line -- has pledged to reinvent itself as a leaner company more responsive to U.S. consumer tastes, including an increasing appetite for smaller, more fuel-efficient models.

Fiat, Italy's largest automaker, which produces a range of models from small "microcars" to high-end sports cars such as Ferrari and Maserati, has the option of pulling out if the deal does not close by June 15.