- The Washington Times - Wednesday, June 10, 2009

The Supreme Court late Tuesday removed the last obstacle to the sale of Chrysler assets to Fiat, declining to hear an appeal by creditors and backers of crash victims’ rights to sue the automaker despite its bankruptcy.

Bankruptcy Judge Arthur J. Gonzalez ruled against the creditors last week and was upheld by a federal appeals court in Manhattan.

The deal’s opponents appealed to the Supreme Court. Justice Ruth Bader Ginsburg issued a stay Monday to allow the court to decide whether to take the case, which a short unsigned opinion said the court had opted not to do.

Three Indiana pension and contruction funds, which hold less than 1 percent of Chrysler’s secured debt, had taken the lead in the case, arguing that the bankruptcy deal unfairly favored unsecured stakeholders such as the autoworkers union ahead of secured debtholders such as themselves.

The decision could affect the bankruptcy restructuring of General Motors, which also is opposed by bondholders.

The White House praised the court’s action, saying, “The Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker.”

Separately, Judge Gonzalez ruled Tuesday that the No. 3 U.S. automaker is within its rights to terminate relationships with 789 auto dealers across the nation. The dealerships will no longer sell new Chryslers, Jeeps or Dodges, Judge Gonzalez ruled, affirming the Tuesday deadline set by Chrysler three weeks ago.

Tammy Darvish, vice president of Darcars Automotive Group and chairman of the board of the Washington Area Auto Dealers Association, reacted emotionally. The Silver Spring company has 17 area dealerships.

“I’m surprised,” she said after attending the hearing. “Nobody thought he was going to restore the 789 dealers, I just thought he was going to extend the deadline, maybe give the dealers more of a chance to wind down.”

The rejected Chrysler dealers make up 25 percent of the automaker’s total, and some said their hope now lies with Congress, where legislation was introduced Monday to preserve their franchise rights. Franchise relationships are codified in state laws that are hard to break except in cases such as bankruptcy, which is governed by federal law.

Jack Fitzgerald, owner of 11 Fitzgerald Auto Malls in the Washington area and a leading opponent of Chrysler’s plan, said it’s not hard to have reorganization plans approved by bankruptcy court.

“It’s not like they have to have a really good business case, they just have to have a business case,” he said. “Our best hope is to have Congress step in.”

Unless Congress intervenes successfully and garners President Obama’s signature, the rulings put a coda on a bitter chapter that saw rejected Chrysler dealers blasting the maker of the cars they’ve sold for decades.

Reuters news agency reported Tuesday night, citing a person familiar with the plans, that Chrysler intended to make the final cash transfers to its creditors Wednesday morning and officially close its sale to Fiat by 9 a.m. Dealerships have scrambled over the past three weeks to unload their inventory of new Chrysler makes ahead of Tuesday’s deadline. Some held liquidation sales and face bankruptcy.

In general, though, dealers have sold most or all of their new Chryslers either to retail buyers or other dealers. Some report big losses, but others experienced modest losses or broke even.

“We are selling cars to anybody and everybody,” said Rick Shaub, owner of Montrose Dodge in Germantown. Mr. Shaub said he will continue in business, selling used cars.

“We’ve had a lot of traffic, but 90 percent of them think we’re going to give them away,” he said. “But on most of our cars sold, we’re making money or breaking even.”

However, Mr. Shaub reports he has sold only half of his new Dodges, and plans to transfer the rest to other dealers on terms set by Chrysler.

The automaker extended its deadline for dealers to reach sale terms with other dealers from Tuesday to Monday the deadline for the Fiat deal. That won’t be necessary for some.

“I don’t have any leftover inventory,” Mr. Fitzgerald said, adding that he “lost a lot of money.”

Elias Kymingham, general manager of Laurel Dodge, family run since 1964, also said his lot was empty. The dealership has 26 employees, and some have been there for 30 years.

Laurel Dodge will continue selling used cars and doing non-warranty service, he said. The business has a strong balance sheet and no debt, he said.

The legislation protecting dealer franchises is co-sponsored by two key Maryland Democrats, House Majority Leader Steny H. Hoyer and Rep. Chris Van Hollen, who works closely with House Speaker Nancy Pelosi, California Democrat.

The two congressmen will hold a press conference Wednesday at 1:15 p.m. to discuss the bill, which has been promoted by Mr. Fitzgerald, a major business constituent for both.

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