Chrysler faces its day of judgement today (27 May) as a bankruptcy court judge rules on a sale of its key assets to give the ailing automaker a fresh start in a partnership with Italy’s Fiat.
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If Judge Arthur Gonzalez approves the fast-track plan, a new Chrysler could emerge within days, according to President Barack Obama’s administration, which is spearheading the plan and providing emergency funding, Agence France-Presse (AFP) said.
A US Treasury court filing last week said that if the plan was approved by Gonzalez, the sale would likely be closed by Friday “and the launch of a new Chrysler achieved.”
A source familiar with talks on Chrysler told AFP the rebirth of the new firm was now “pretty close,” adding: “It won’t be this week necessarily but it should be close.”
Although the ‘old’ Chrysler may still be subject to a long period of 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.
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By GlobalDataThe alliance with Fiat will initially give the Italian company a 20% stake in return for access to its technology to enable Chrysler to make the smaller, greener cars that are increasingly in demand.
AFP noted that Chrysler cleared a potential hurdle on Tuesday as a district court judge rejected an effort to take the case out of bankruptcy court for a full hearing on the legal rights of some creditors.
US District Judge Thomas Griesa refused to take the matter away from the bankruptcy court, dismissing a challenge from Indiana’s state treasurer who had argued that the Chrysler plan violates investor and creditor rights.
The ruling in New York federal court means a hearing will proceed Wednesday before Gonzalez on the fast-track plan.
“We are pleased with the judge’s decision to deny the withdrawal of the reference and therefore deny the motion for a stay for the Indiana pension funds. We look forward to the hearing on our sale motion in U.S. Bankruptcy Court tomorrow,” Chrysler said in a statement.
Any delay would have been a major setback for Chrysler and the Obama administration, which aims for a rapid bankruptcy exit to restart its factories and revamp operations, AFP noted.
Robert Kidder, ex-chairman of Borden Chemical and Duracell International, was to take over as chairman at Chrysler from Robert Nardelli upon the exit from bankruptcy.
Fiat chief executive Sergio Marchionne was expected to hold the same title at Chrysler after its bankruptcy exit.
