A US bankruptcy court is today (28 May) holding a second and possibly decisive day of hearings on Chrysler’s bid for revival as a Fiat partner.
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Judge Arthur Gonzalez in New York was widely expected to overrule hundreds of objections to the Chrysler rescue plan and approve the bankruptcy, Agence France-Presse (AFP) said.
He heard 10 hours of arguments on Wednesday but said there were more witnesses to be heard on Thursday, and possibly even Friday, before he could rule.
If Gonzalez approves the bankruptcy, a new-look Chrysler could emerge within days, according to President Barack Obama’s administration, which is spearheading the plan and providing emergency funding.
If not, Chrysler faces an uncertain future, with a worst-case scenario being Fiat abandoning the tie-up and the US automaker going into liquidation.
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By GlobalDataAFP noted that the Centre for Automotive Research this week said failure to ensure fast, smooth bankruptcies for Chrysler and GM could trigger the loss of 1.3m jobs by the end of 2009 and the near closure of both companies.
Opponents to the sale of Chrysler to a group led by Fiat include creditors and many of the car dealerships who face being shut down.
Glenn Kurtz, an attorney for pension funds opposing the sale, argued on Wednesday that the Chrysler bankruptcy plan was “tantamount to placing the ice cube in the sun and saying we have got to sell it quickly before it melts”, AFP said.
But Gonzalez ruled out allowing any new legal delays before he made his ruling.
A Chrysler lawyer warned Fiat had the right to “walk away” on 15 June if no deal was finalised – a potentially disastrous development for the collapsing US automaker.
Fiat executive Alfredo Altavilla, an architect of the proposed partnership, said “if this agreement is not closed by 15 June we will need to reconsider our ability to close the transaction.”
But he was also optimistic, saying Chrysler could be brought back to profitability in the same way Fiat was, after its own financial problems, starting in 2004.
“Fiat in 2004 was in a situation not very different to what Chrysler is in today. We implemented this turnaround in three years by using exactly the same methodology.”
But he also underlined Chrysler’s perilous situation. “Chrysler today is not generating any revenue,” he said. “Without the deep budget of course Chrysler cannot stay alive.”
Kurtz also raised concerns that the Chrysler-Fiat partnership was being forced through without giving time for other potential buyers to compete.
Chrysler’s former president, Tom LaSorda, responded that there simply wasn’t any other company. “We couldn’t bring anyone to the altar to bring us five cents,” he said, according to AFP’s report. “We were very lucky to get a player like Fiat.”
Although an “old” Chrysler may still be subject to court supervision, the new firm led by Fiat executives would be able to begin operations with Chrysler’s plants and workers, but freed of much of its debts and legacy costs.
