Supreme Court to take more time to consider whether it will intervene in bankruptcy sale
By the Associated Press
WASHINGTON—Supreme Court Justice Ruth Bader Ginsburg has temporarily delayed Chrysler's sale to Fiat (FIA.MI).
Ginsburg says in an order Monday that the sale is "stayed pending further order." The action indicates that the delay may only be temporary.
Chrysler has said a delay could scuttle the deal.
A federal appeals court in New York had earlier approved the sale, but gave opponents until 4 p.m. EDT Monday to try to get the Supreme Court to intervene. Ginsburg issued her order just before 4 p.m., when Chrysler would have been free to complete the sale of most of its assets to Fiat.
Ginsburg could decide on her own whether to extend the delay or ask the full court to decide. It is unclear when she or the court will act.
Meanwhile, a senior Obama administration official said Fiat would shake up management and change the culture of Chrysler if the courts allow the sale to go through.
The official said management changes would go deeper than the departure of CEO Bob Nardelli and Vice Chairman Tom LaSorda. The official spoke on condition of anonymity because the changes have not been made public.
Chrysler said it had no comment until it receives further information from the court.
Chrysler claims the agreement with Fiat is the best deal it can get for its assets and is critical to the company's plan to emerge from bankruptcy protection.
But a trio of Indiana state pension and construction funds, which hold a small part of Chrysler's debt, have been fighting the sale, claiming that it unfairly favors Chrysler's unsecured stakeholders ahead of secured debtholders like themselves.
As part of Chrysler's restructuring plan, the automaker's secured debtholders will receive $2 billion, or about 29 cents on the dollar, for their combined $6.9 billion in debt. The Indiana funds bought their $42.5 million in debt in July 2008 for 43 cents on the dollar.
The funds also are challenging the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority.
Consumer groups and individuals with product-related lawsuits also are contesting a condition of the Chrysler sale that would release the company from product liability claims related to vehicles it sold before the "New Chrysler" partnered with Fiat is created.
Individuals with claims against "Old Chrysler" would have to seek compensation from the parts of the company not being sold to Fiat. But those assets have limited value and it's doubtful that there will be anything available to pay consumer claims.
The appeals come as Congress intensifies its scrutiny of the Obama administration's government-led restructuring of Chrysler and General Motors Corp. The Senate Banking Committee said it planned to call Ron Bloom, a senior adviser to the auto task force, and Edward Montgomery, who serves as the Obama administration's director of recovery for auto communities and workers, to a hearing Wednesday.
Sen. Christopher Dodd, the committee's chairman, planned to review the use of TARP funds to help the auto companies and look at whether taxpayers will receive a return on their investment.
GM and Chrysler executives faced questions last week from Congress over the elimination of hundreds of dealerships as part of the companies' reorganizations.