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Supreme Court stalls sale of Chrysler
Question of the Day
Supreme Court Justice Ruth Bader Ginsburg on Monday put the brakes on Chrysler’s sale to Fiat — at least for now — indicating that the court will consider a longer-term delay sought by Chrysler creditors.
Justice Ginsburg’s one-sentence order that the sale is “stayed pending further order” fostered uncertainty about Chrysler’s fate, but the language she used left open the possibility that the court might approve the deal within days.
Failure to complete the transaction by June 15 would allow Italy’s Fiat Group to walk away — with a $35 million breakup fee — but Chief Executive Officer Sergio Marchionne said he did not intend to do so.
Meanwhile, legislation was introduced in Congress on Monday on behalf of Chrysler LLC and General Motors Corp. dealers who are slated to lose their franchises as part of the companies’ bankruptcy proceedings. The bill is supported by House Majority Leader Steny H. Hoyer and Rep. Chris Van Hollen, Maryland Democrats.
Chrysler, backed by the Obama administration, recently warned that delaying the sale “will, in practical effect, kill the Fiat sale and lead to a liquidation.”
After Justice Ginsburg’s order Monday, reaction from the Auburn Hills, Mich., automaker was terse. “Pending further information from the court, we have no comment at this time,” Chrysler said.
Mr. Marchionne said moments after Justice Ginsburg’s order that he would “never” abandon the deal.
“We should just be patient and let the system work,” Mr. Marchionne told Bloomberg News.
A federal appeals court in New York approved the Chrysler sale Friday but allowed the creditors until 4 p.m. Monday to get the Supreme Court to intervene, which it did right before the deadline.
Three Indiana state pension and construction funds, owners of a tiny slice of the automaker’s debt, have contested the sale, arguing that it treats secured debt holders unfairly. Secured debt holders have a $6.9 billion claim against Chrysler and would receive $2 billion, or 29 cents on the dollar, under the restructuring. The Indiana funds paid 43 cents on the dollar for the $42.5 million in bonds they bought in July.
The funds also say the Treasury Department’s use of money from the Troubled Asset Relief Program to aid Chrysler was unconstitutional because the administration acted without congressional approval.
Amid congressional scrutiny of the Obama administration’s growing role in the auto industry, Reps. Frank Kratovil Jr., Maryland Democrat, and Dan Maffei, New York Democrat, introduced the Automobile Dealer Economic Rights Restoration Act on Monday afternoon. Mr. Hoyer and Mr. Van Hollen are co-sponsors.
The legislation was spurred by Jack Fitzgerald, owner of 13 dealerships in Maryland, Pennsylvania and Florida, who sells GM and Chrysler makes. He has bitterly opposed the dealer terminations called for in the companies’ restructuring plans, which he derided Monday as “one Wall Street crowd taking care of another Wall Street crowd, it’s big capital beating up on little capital.”
The bill would restore “the economic rights” of the dealers as they were before the automakers filed for bankruptcy protection and requires the automakers to reinstate franchise agreements if a dealer requests it.
By Matt Kibbe
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