Indiana Pension Funds Find "Pause" Button on Chrysler-Fiat

A group of public-sector pension funds based in Indiana has managed to hit the "pause" button on the fast-forward bankruptcy and reorganization of Chrysler.

That's something that a couple of seemingly more formidable groups have failed to accomplish so far -- a dissident group of Chrysler bondholders with up to $1 billion in Chrysler bonds; plus many of the Chrysler, Dodge and Jeep dealers Chrysler intends to terminate.

But in response to an appeal from the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust and the Indiana Major Moves Construction Fund, the U.S. Supreme Court today agreed to put Chrysler's sale on hold, to give the pension funds a chance to present their arguments, according to Reuters.

For its part, Chrysler has been treating the Fiat transaction as a done deal since June 1. "As George W. Bush learned from his 'Mission Accomplished' debacle, there's always a danger in declaring victory prematurely," said Jeremy Anwyl, CEO of Edmunds.com.

The gist of the Indiana groups' argument is that the proposed takeover of Chrysler by Fiat goes too far outside normal procedure in U.S. Bankruptcy Court, and deprives the pension funds' legal rights to a share of Chrysler's value.

A petition filed on May 27 on behalf of the Indiana retirement funds calls the Fiat transaction brokered by the U.S. Treasury Department "a flagrant, violent overthrow" of due process.

The complaint says the Fiat deal puts "political objectives" ahead of contractual rights and "long-recognized legal standards."

The Indiana petition is sarcastic in its criticism of the proposed Chrysler reorganization. "-- all you have to do (at least if you're the U.S. Treasury) is follow three easy steps," the complaint said:

"(1) Provide enough funding to bring a business to, or temporarily keep the business at, the precipice of collapse;

"(2) Decide who you want to pay, how much and in what currency (and who you don't);

"(3) Capitalize on the emergency you've orchestrated by agreeing to provide the remaining financing for the reorganization on the condition that the company file chapter 11 and sell its assets to a new shell corporation that will in turn pay who you want and have no obligation to those you don't," the pension groups said.

"It can't be that easy," they said. "It should be impossible."

On the same day, Chrysler CEO Bob Nardelli countered in a written statement that Chrysler had no alternative to the Fiat deal except liquidation.