- The Washington Times - Tuesday, June 2, 2009

One of Detroit’s Big Three automakers is a step closer to foreign partnership, with a federal bankruptcy judge approving the sale of most of the company’s assets to Italy’s Fiat.

The ruling by Judge Arthur Gonzalez, issued late Sunday, paves the way for Chrysler to emerge from bankruptcy and pushes forward a major component of President Obama’s plans to restructure the nation’s deeply troubled automotive sector.

“Only a month ago, this great American company’s very future was in doubt. Now, as a result of a substantial commitment by the U.S. government, and tough sacrifices from all stakeholders involved, Chrysler has a new lease on life,” Mr. Obama said in a statement issued Monday morning.

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In a speech later in the morning, the president acknowledged that the car company’s future solvency is “now in the hands of [Chrysler-Fiat] executives, managers and workers.”

“But what the completion of this alliance means is that tens of thousands of jobs that would have been lost if Chrysler had liquidated will now be saved,” he said.

Judge Gonzalez’s decision was issued at lightning speed in legal terms because Chrysler had filed for bankruptcy only a month ago.

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.

“Any material delay would result in substantial costs in several areas, including the amounts required to restart the operations, loss of skilled workers, loss of suppliers and dealers who could be forced to go out of business in the interim, and the erosion of consumer confidence,” he wrote.

The ruling was greeted with a collective sigh of relief by Chrysler officials and stockholders.

“With this approval, the new Chrysler Group is created and can prepare to launch as a vibrant new company formed with Fiat,” said Robert Nardelli, Chrysler’s outgoing chairman and chief executive.

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.

The ruling came ahead of fellow Detroit automaker General Motors Corp.’s government-backed bankruptcy protection filing. GM filed for Chapter 11 in New York’s Southern District early Monday.

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.

Not everyone was pleased with the judge’s move. Three Indiana pension funds that had invested in Chrysler debt are set to appeal the decision to the district court in Manhattan, according to court documents.

The pension funds have asked that the bankruptcy court deny a request to close the sale immediately to give them time to appeal, said their attorney, Glenn Kurtz of White & Case of New York.

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

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

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.

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.

In a separate ruling Monday, Judge Gonzalez said the funds do not have standing for that challenge because they will receive their fair share of the $2 billion set aside for secured debt-holders, which is more than they would have received if Chrysler had liquidated.

Objections were also filed by the automaker’s suppliers, former employees and people with product-related claims against the company, according to the Associated Press.

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