Chrysler awaits court ruling
NEW YORK: A US court was set Thursday to hold a second and possibly decisive day of hearings on Chrysler's bid to seek resurrection as a partner of Italian auto giant Fiat.
Judge Arthur Gonzalez, at the US Bankruptcy Court in New York, was widely expected to overrule hundreds of objections to the Chrysler rescue plan and approve the bankruptcy.
However, after 10 hours of arguments on Wednesday, Gonzalez said there were more witnesses to be heard Thursday, starting at 1400 GMT, and possibly even Friday before he could rule.
If Gonzalez approves the bankruptcy, a new-look Chrysler could emerge within days, according to President Barack Obama's administration, which is spearheading the plan and providing emergency funding.
If not, Chrysler faces an uncertain future, with a worst-case scenario being Fiat abandoning the tie-up and the US automaker going into liquidation.
Chrysler's race comes as General Motors, also living off government loans, scrambles ahead of a June 1 deadline that will likely lead to its own bankruptcy filing.
The entire US auto industry, long a world leader, is struggling to survive, raising fears of potentially massive new fallout to the already recession-hit national economy.
The Center for Automotive Research this week said failure to ensure fast, smooth bankruptcies for Chrysler and GM could trigger the loss of 1.3 million jobs by the end of 2009 and the near shutdown of both companies.
Opponents to the sale of Chrysler to a group led by Fiat include creditors and many of the car dealerships who face being shut down.
Glenn Kurtz, an attorney for pension funds opposing the sale, argued Wednesday that the Chrysler bankruptcy plan was "tantamount to placing the ice cube in the sun and saying we have got to sell it quickly before it melts."
But Gonzalez ruled out allowing any new legal delays before he makes his ruling.
An attorney for Chrysler warned Fiat had the right to "walk away" on June 15 if no deal was finalised -- a potentially disastrous development for the collapsing giant.
Fiat executive Alfredo Altavilla, an architect of the proposed partnership, echoed that, saying that "if this agreement is not closed by June 15 we will need to reconsider our ability to close the transaction."
He also expressed optimism, saying Chrysler could be brought back to profitability in the same way Fiat was, after its own financial problems, starting in 2004.
"Fiat in 2004 was in a situation not very different to what Chrysler is in today. We implemented this turnaround in three years by using exactly the same methodology."
But he also underlined Chrysler's perilous situation.
"Chrysler today is not generating any revenue," he said. "Without the deep budget of course Chrysler cannot stay alive."
Kurtz also raised concerns that the Chrysler-Fiat partnership was being forced through without giving time for other potential buyers to compete.
Chrysler's former president, Tom LaSorda, responded that there simply wasn't any other company. "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."
As the hearing dragged on Wednesday, exchanges between witnesses and lawyers occasionally became testy. Gonzalez several times rebuked Kurtz instructing him to put questions "in a more polite manner."
A US Treasury court filing last week said that if the plan is approved by Gonzalez, the sale would likely close by Friday "and the launch of a new Chrysler achieved."
Although the "old" Chrysler may still be subject to court supervision, the new firm led by Fiat executives would be able to begin operations with Chrysler's plants and workers, but freed of much of its debts and legacy costs.
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 firm.
GM meanwhile was widely expected to file for bankruptcy protection ahead of a June 1 deadline imposed by the Obama administration, which is providing GM with emergency cash.
Bankruptcy loomed after bondholders rejected a plan to swap a large portion of the troubled automaker's debt for equity in the firm.