U.S. Supreme Court clears sale of Chrysler assets to Fiat
Last Updated: Tuesday, June 9, 2009 | 8:15 PM ET
CBC News
A U.S. Supreme Court decision has cleared the way for Chrysler to proceed with the sale of most of its assets to Italian automaker Fiat.
The court rejected a plea from consumer groups and three Indiana pension plans to block the sale.
Fiat has the legal right to walk away from the deal if the sale is not completed by June 15.
In a brief filed with the Supreme Court Tuesday afternoon, Chrysler and Fiat warned that the deal will terminate if it doesn't close by that date.
On Monday, Justice Ruth Ginsburg ordered a temporary suspension of the sale. She decided to review an appeal by a group of Indiana pension and construction funds that own a small part of Chrysler's secured debt. They claimed the deal unfairly favours Chrysler's unsecured stakeholders over secured debt-holders like them.
The court issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong.
"The applicants have not carried that burden," the court said.
Obama administration issues warning
The Obama administration had said in a separate court filing that each day of delay consumes more of the financing provided by the government.
"If the closing is delayed by more than approximately 10 days, a sufficient amount of the current commitment of debtor-in-possession financing from the United States will have been consumed as to require the government either to increase its overall funding to the detriment of taxpayers, or abandon its role in the transaction," the administration said.
Production at Chrysler's manufacturing plants remains halted pending the closing of the sale. Chrysler says it is losing $100 million US every day its plants are closed.
Meanwhile, a U.S. bankruptcy court judge ruled that Chrysler can go ahead with its plan to terminate 789 dealer franchises as part of its restructuring plans.
Judge Arthur Gonzalez issued the order late Tuesday afternoon after hearing arguments against the plan by more than 25 lawyers representing hundreds of dealers from across the U.S.
The ruling said the franchises can no longer act as authorized Chrysler, Dodge and Jeep dealers, effective immediately.
Lawyers for the dealers argued that their existence doesn't result in any substantial costs for Chrysler and that little would be gained by terminating their franchises.
Chrysler maintained that it needed to cut its dealer ranks by about 25 per cent as part of its plans to cut costs and quickly emerge from Chapter 11 bankruptcy protection.
As the two sides awaited the ruling, some dealers were selling the last cars on their lots and preparing to shut their doors for good at the end of the day, while others were making plans to sell used cars or other brands after severing ties with Chrysler.
With files from The Associated Press
