June 9, 2009 5:51 AM
- Text
Chrysler Awaits Bankruptcy Court Ruling
(CBS/ AP)
Chrysler LLC could be hours away from a ruling on its plan to sell most of the company to a group led by Italy's Fiat Group SpA, a big step toward its goal of a speedy exit from bankruptcy protection.
Closing statements on the sale began in U.S. Bankruptcy Court Friday afternoon, marking the third day of hearings on the proposed deal.
Judge Arthur Gonzalez is expected to approve the sale Friday, but it's likely that attorneys for three Indiana state pension and construction funds will appeal the decision and possibly force Chrysler to postpone the deal's closing.
Chrysler claims that any delay could push Fiat to back out if the deal, since it's set a deadline of June 15 to wrap up a transaction.
If the sale ultimately goes through, the automaker could emerge from Chapter 11 bankruptcy protection within weeks, defying observers who said that the company could linger under court oversight for years.
Chrysler filed for Chapter 11 April 30.
Chrysler has already shed more than 30,000 workers, 40 percent of its workforce and wants to close nearly 800 dealerships, reports CBS News correspondent Anthony Mason. Those dealers say they're being steamrolled by the accelerated bankruptcy hearings.
"If this can happen to me - a profitable business owner for 30 years - it can happen to anyone," dealer Colleen MacDonald said.
With the sale, the U.S. and Canadian governments will own 10 percent of the new Chrysler; Fiat will own up to 35 percent, Mason reports. The majority will be owned by the United Auto Workers health care trust, but it will have only one seat on the board.
"The new Chrysler bears no resemblance to the old Chrysler," analyst John Casesa told Mason. "The best parts of the old Chrysler - Jeep, the Minivan business - will now be part effectively of a big international company."
Under that section of the bankruptcy code, companies are freed from the threat of creditors' lawsuits while restructuring their finances. They continue to run and, unlike Chapter 7, don't end up liquidating their assets.
Attorneys for the Auburn Hills, Mich.-based automaker say that with the help of Fiat and its technology, a leaner Chrysler could shift more easily to building smaller, more fuel-efficient cars.
The Indiana funds are fighting the sale, saying that as secured lenders they shouldn't be forced to take such a large loss on their investment and deserve more. The funds hold $42.5 million, or about 1 percent, of Chrysler's total $6.9 billion in secured debt. They bought the debt in July 2008 for 43 cents on the dollar.
In the days leading up to Chrysler's filing for bankruptcy protection, most of the bondholders agreed to a deal that would give them a combined $2 billion to erase the debt, but some of them balked and the deal fell through, forcing the company into a reorganziation in bankruptcy court.
Like the funds, many Chrysler dealers, bondholders and former employees have filed objections to the sale and say they are being steamrolled by the exceptionally quick bankruptcy court proceedings.
Friday's court hearings got going with testimony from a trio of Chrysler dealers slated to lose their franchises as part of Chrysler's restructuring. Chrysler wants court approval to terminate the franchises of about 789 of its dealers, calling it a needed cost-cutting measure.
The hearings followed two marathon court sessions including a Thursday hearing that went until almost midnight.
Richard Mealey, president of Birmingham Chrysler Jeep in Troy, Mich., said that if the judge approves the termination of the dealer franchises, he expects to layoff most of his 89 employees at the end of next week, with the rest staying on to keep the body shop open and help wind down the rest of the business.
"We feel totally rejected, dejected and very, very concerned about the future," Mealey said.
Closing statements on the sale began in U.S. Bankruptcy Court Friday afternoon, marking the third day of hearings on the proposed deal.
Judge Arthur Gonzalez is expected to approve the sale Friday, but it's likely that attorneys for three Indiana state pension and construction funds will appeal the decision and possibly force Chrysler to postpone the deal's closing.
Chrysler claims that any delay could push Fiat to back out if the deal, since it's set a deadline of June 15 to wrap up a transaction.
If the sale ultimately goes through, the automaker could emerge from Chapter 11 bankruptcy protection within weeks, defying observers who said that the company could linger under court oversight for years.
Chrysler filed for Chapter 11 April 30.
Chrysler has already shed more than 30,000 workers, 40 percent of its workforce and wants to close nearly 800 dealerships, reports CBS News correspondent Anthony Mason. Those dealers say they're being steamrolled by the accelerated bankruptcy hearings.
"If this can happen to me - a profitable business owner for 30 years - it can happen to anyone," dealer Colleen MacDonald said.
With the sale, the U.S. and Canadian governments will own 10 percent of the new Chrysler; Fiat will own up to 35 percent, Mason reports. The majority will be owned by the United Auto Workers health care trust, but it will have only one seat on the board.
"The new Chrysler bears no resemblance to the old Chrysler," analyst John Casesa told Mason. "The best parts of the old Chrysler - Jeep, the Minivan business - will now be part effectively of a big international company."
Under that section of the bankruptcy code, companies are freed from the threat of creditors' lawsuits while restructuring their finances. They continue to run and, unlike Chapter 7, don't end up liquidating their assets.
Attorneys for the Auburn Hills, Mich.-based automaker say that with the help of Fiat and its technology, a leaner Chrysler could shift more easily to building smaller, more fuel-efficient cars.
The Indiana funds are fighting the sale, saying that as secured lenders they shouldn't be forced to take such a large loss on their investment and deserve more. The funds hold $42.5 million, or about 1 percent, of Chrysler's total $6.9 billion in secured debt. They bought the debt in July 2008 for 43 cents on the dollar.
In the days leading up to Chrysler's filing for bankruptcy protection, most of the bondholders agreed to a deal that would give them a combined $2 billion to erase the debt, but some of them balked and the deal fell through, forcing the company into a reorganziation in bankruptcy court.
Like the funds, many Chrysler dealers, bondholders and former employees have filed objections to the sale and say they are being steamrolled by the exceptionally quick bankruptcy court proceedings.
Friday's court hearings got going with testimony from a trio of Chrysler dealers slated to lose their franchises as part of Chrysler's restructuring. Chrysler wants court approval to terminate the franchises of about 789 of its dealers, calling it a needed cost-cutting measure.
The hearings followed two marathon court sessions including a Thursday hearing that went until almost midnight.
Richard Mealey, president of Birmingham Chrysler Jeep in Troy, Mich., said that if the judge approves the termination of the dealer franchises, he expects to layoff most of his 89 employees at the end of next week, with the rest staying on to keep the body shop open and help wind down the rest of the business.
"We feel totally rejected, dejected and very, very concerned about the future," Mealey said.
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