Chrysler gets judge’s approval for sale of assets to Fiat

Judge Arthur J. Gonzalez of the United States Bankruptcy Court for the Southern District of New York approved the $2 billion sale, which would help the American automaker quickly get back on its feet, after filing for bankruptcy on April 30.

Chrysler’s coup came only a few hours before an expected bankruptcy filing by General Motors Corp.

Gonzalez’s rationale for approval
Late Sunday, Judge Arthur Gonzalez ruled that a speedy sale was required to keep the value of Chrysler from going down further and that it would be better for the company's stakeholders, who will get bigger returns from the sale than from the liquidation.

"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," wrote Gonzalez in the ruling. "In addition, delay may vitiate several vital agreements negotiated amongst the debtors and various constituents."

So, the judge reasoned, he has agreed to the proposed sale.

Selling of the assets was the main focus of a restructuring plan backed by President Barack Obama's automotive task force.

The ‘new look’ Chrysler
Now, when Chrysler surfaces again, it will have a new set of owners -- a union retiree trust owning 55 percent, Fiat having a 20 percent share (which may eventually grow to 35 percent), and minority stakes 8 percent and 2 percent, held by the United States and Canadian governments respectively.

Also, there will be a new chairman, C. Robert Kidder, the ex-chairman of Borden Chemical and of Duracell, along with new members on the board.

Lenders’ objections might delay the sale
Chrysler has maintained that the only way it can evade piece by piece sale is to sell off a bulk of its assets to Fiat Group SpA.

However, the deal might be delayed due to various objections, including that of a group of Indiana pension funds, who have insisted that they ought to have more than the 29 cents on the dollar that they and other secured lenders will receive as repayment.

Objections were also filed by some of the 789 dealerships that Chrysler plans to cut, suppliers and some former employees. A separate hearing to address Chrysler's plan of rejecting 789 franchises is scheduled for Wednesday.

Chrysler is afraid that a delay might cause it to lose the deal as Fiat has an option of backing out if the sale is not through by Jun. 15.