April 30 (Bloomberg) -- Chrysler LLC, the bankrupt automaker planning to reorganize, is seeking quick court approval of its partnership with Italy’s Fiat SpA to avoid a liquidation that would cost the U.S. thousands of jobs and billions of dollars in pension payments.

If the deal is rejected and Chrysler liquidates, “it will mean the end of an iconic, 83-year-old American car company,” and the loss of jobs for 38,500 workers, said lawyer Corinne Ball of Jones Day in a court filing.

Chrysler employees and retirees would lose $9.8 billion in benefits and $2 billion in pension payments, lawyers said in today’s so-called first-day pleadings that seek to organize Chrysler’s 25 affiliates into a single bankruptcy proceeding.

“Time is of the essence,” as the company will idle most of its operations pending approval of the Fiat sale, Ball said in the filing.

All the parties who would be affected by a potential liquidation have made concessions to support the Fiat deal, Ball said, citing the U.S. and Canadian governments, which will together give $6 billion in taxpayer money to start and maintain operations at the new company.

“This would be an addition to the proposed $4.5 billion debtor-in-possession loan,” Ball said in a pleading in support of the first-day motions.

Chrysler’s Liabilities

As part of the proposed transaction, “New Chrysler,” a wholly owned subsidiary of Fiat, would assume some of the old Chrysler’s liabilities, and pay $2 billion into the company’s bankrupt estate, according to court documents.

The company, the third-biggest U.S. automaker, will go before U.S. Bankruptcy Judge Arthur Gonzalez tomorrow on its first-day motions.

Chrysler’s largest secured creditors, JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. have agreed to recover 28 cents on the dollar for their $6.9 billion in claims. Minority shareholder and parent Daimler AG agreed to forgive $1.5 billion in second-lien debt and majority shareholder Cerberus Capital Management LP has agreed to forgive $500 million in second lien debt and help fund the company’s pension plan.

Also, unions have agreed to wage reductions, dealers will reduce their contract margins, and suppliers have taken 3 percent price cuts on top of earlier measures.

The case is In re. Chrysler LLC, 09-50002, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

Chrysler LLC’s Top 10 Unsecured Creditors
Company Claim Amount (Millions)

Ohio Module Manufacturing Co.             $70.3
BBDO Detroit Inc.                          58.1
Johnson Controls                           50.3
Continental Automotive                     47.0
Cummins Engine Co.                         43.9
Germersheim Spare Parts                    36.2
Comau Inc.                                 32.1
Visteon                                    25.6
New Process Gear Division                  19.6
Denso International America Inc.           18.7

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

Last Updated: April 30, 2009 18:09 EDT