Thursday May 28, 09:45 PM
Chrysler would disintegrate without Fiat deal: CEO
By Sebastian Smith
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NEW YORK (AFP) - Chrysler (Xetra: 710000 - news) chief executive Robert Nardelli urged a US bankruptcy judge Thursday to approve the failed auto giant's tie-up with Fiat (Milan: F.MI - news) , saying the alternative would be a calamitous liquidation.
Nardelli, testifying in US Bankruptcy Court where Chrysler is seeking approval for a plan to resurrect the failed company in an alliance with Italy's Fiat, said the US government-crafted plan was the only way out.
"It got down to either file for bankruptcy ... or liquidate the company. I can't imagine using business judgment that (would result in) liquidating a company and impacting some 60,000 employees," Nardelli said.
"It would have been just a cataclysmic impact on the industry and on the economy."
Nardelli was testifying in the second day of hearings on the plan, countering arguments from some creditors, car dealers and pension holders challenging what they see as a government drive to circumvent their legal rights.
Nardelli painted a dramatic picture of a healthy company suddenly fighting for life after the US financial markets went into a "death spiral" in second half of last year, drying up credit throughout the economy.
Nardelli described "a financial meltdown in the ability to get liquidity" and for Chrysler "the roof fell in, or the bottom fell out."
"Either way -- it's almost as if someone flipped the switch," he said.
Judge Arthur Gonzalez was widely expected to rule in favor of the huge bankruptcy deal.
However bitter rearguard action from opponents meant marathon court sessions on Wednesday, Thursday and likely at least into Friday.
The US government could also rescue General Motors (NYSE: GM - news) under a similar plan that would be expected to put up to 72.5 percent of the biggest automaker under state ownership, according to documents filed by GM Thursday.
If Gonzalez gives the bankruptcy the green light, then a new-look Chrysler could emerge within days, according to President Barack Obama's administration.
Otherwise Chrysler faces an uncertain future, with a worst-case scenario being Fiat abandoning the tie-up and the US automaker going into liquidation, with massive job losses and a body blow to an economy already in recession.
In testimony on Wednesday, Fiat executive Alfredo Altavilla, an architect of the proposed partnership, warned: "if this agreement is not closed by June 15 we will need to reconsider our ability to close the transaction."
Glenn Kurtz, a lawyer representing some of the opponents, argued Wednesday that the Chrysler-Fiat partnership was being forced through without giving time for other potential buyers to compete.
But Chrysler's former president, Tom LaSorda, responded that there simply wasn't any alternative. "We couldn't bring anyone to the altar to bring us five cents," he said. "We were very lucky to get a player like Fiat."
The third-largest US automaker was forced to file for bankruptcy protection on April 30 and agreed to an alliance with Fiat that will initially give the Italian company a 20 percent stake.
In return, Fiat will allow access to its technology to enable the US carmaker to make the smaller, greener cars that are increasingly in demand.
The US Treasury has provided Chrysler with some nine billion dollars in emergency aid. Fiat must repay this money if it wants to take a majority stake in the Detroit (DETROIT.SN - news) firm.
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