Tuesday June 9, 11:57 PM
US urges Supreme Court to act quickly on Chrysler
WASHINGTON (AFP) - The US government urged the Supreme Court Tuesday to move swiftly to allow Chrysler (Xetra: 710000 - news) to exit bankruptcy protection, saying a delay would imperil a planned alliance with Italian automaker Fiat (Milan: F.MI - news) .
The court's decision will be closely watched not only for its impact on Chrysler's future, but also how it may affect the bankruptcy proceedings of General Motors (NYSE: GM - news) .
GM filed June 1 for creditor protection in the hope of a 60- to 90-day exit under a plan that would give the US government a majority stake in the new GM.
The brief was filed shortly before a bankruptcy judge approved Chrysler's plan to eliminate a quarter of its dealers despite strong objections from some of the dealerships.
Some 75 percent of the dealers GM plans to close as part of its restructuring plan have already agreed to the automaker's gradual wind-down plan and 90 percent of the remaining dealers have agreed to the automaker's new terms, GM said.
The government brief was among several filed after Justice Ruth Bader Ginsburg signed an order postponing the closure of the plan, which is backed by the US and Canadian governments and which would allow Chrysler to emerge from bankruptcy as a new entity.
The US Justice Department said in the brief that Fiat could legally walk away from the deal if it is not closed by June 15.
"If Fiat is released from the obligation to consummate the transaction as currently structured, it will be free to demand additional concessions before concluding a new agreement," the brief said.
The statement said that because Chrysler is not manufacturing cars and continues to lose money during each day of bankruptcy, "each day consumes approximately 100 million dollars."
A group of Indiana pension funds opposed to Chrysler's sale to Fiat filed the emergency appeal with the Supreme Court, and pointed to a news article citing Fiat's top executive saying he would not walk away from Chrysler.
Sergio Marchionne, chief executive of Fiat, was quoted as saying: "We would never walk away," and added: "We should just be patient and let the system work," according to the brief filed by the pension funds' lawyers.
But a brief filed by Chrysler said that the "hearsay statement reported by the media ... is no guarantee that a new deal could ever be struck."
The Supreme Court has given no indication when it may rule. The temporary halt will allow the justices to consider whether to permit a full hearing on the legal issues -- a delay which Chrysler and US officials say could cause the plan to collapse.
Judge Arthur Gonzalez, in an order approving the Chrysler reorganization May 31, agreed to allow the planned tie-up with Fiat to be completed rapidly.
The judge said he agreed to the accelerated plan in light of arguments from an adviser to the White House auto task force that Chrysler is losing 100 million dollars for each day the plan is delayed.
The plan gives Fiat a 20 percent stake in the Detroit (DETROIT.SN - news) group with a possibility of increasing that share.
In return, Fiat will provide the US carmaker with technology to make the smaller, greener cars that are increasingly in demand.
The new firm would be majority owned by the United Auto Workers (UAW) union, with small stakes by the US and Canadian governments, which would contribute some 10.5 billion dollars to the venture.
Chrysler's dealership network will be cut by a quarter to 2,400 under the plan approved Tuesday allowing for the immediate elimination of 789 dealers.
GM will eliminate 2,400 dealers -- a 40 percent cut from the current level of around 6,000 -- but will give most dealers months to wind down their operations.
The automotive research group Edmunds.com estimates that the elimination of the dealers, which function independently of Chrysler, will result in the loss of 38,000 jobs. That's roughly the size of Chrysler's US workforce.
The GM cuts are expected to result in the loss of 113,000 jobs by the end of 2010.
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
