U.S. automaker Chrysler hopes to end a third day of bankruptcy court hearings on Friday with approval to sell most of its operations to a group led by Italy's Fiat, although opponents are likely file immediate appeals.
Chrysler wants to sell most of its assets to a New Chrysler owned by Fiat
Unwanted plants and businesses will remain in bankruptcy court to settle outstanding claims and liabilities.
Approval would be a victory for the White House, which had been criticized by many bankruptcy specialists for setting a seemingly unrealistic goal of bringing the automaker's operations through Chapter 11 in less than 60 days.
Friday's hearings will begin with testimony from Ronald Kolka, Chrysler's chief financial officer, adding to the nearly 24 hours of hearings on Wednesday and Thursday.
Opponents of the sale, which include debtholders, suppliers and dealers that will be closed, have been using testimony from executives and advisers of Chrysler and Fiat to show they could have avoided bankruptcy or offered more to creditors.
Attorneys have also zeroed in on the role of the government's Auto Task Force, which appeared from emails read in court to have cut short last-minute negotiations and favored a bankruptcy.
It's over, read one email from a task force member to a Chrysler adviser who suggested ways to reach a deal with debtholders hours before a government deadline. The president doesn't do second-round negotiations.
Chrysler attorneys led witnesses to describe the stark realities of a market in which demand plummeted by nearly half in the course of a year as a deep recession and financial crisis swept the United States.
Chrysler's chief executive, Robert Nardelli, described emergency cost-cutting steps the company took in early 2008 as he saw storm clouds gathering in the economy.
In the middle of last year, as gasoline prices soared and crushed demand for Chrysler's lineup of trucks and SUVs, the roof fell in and the floor collapsed.
While the emails read in court seemed to show Chrysler executives bowing to the demands of the task force, Nardelli and others reminded the judge there was no lender or automaker willing to rescue Chrysler other than the U.S. government.
The alternative, Nardelli said, would have been a cataclysmic liquidation, jolting an economy already mired in a deep downturn.
Participants in the hearings said the length of the testimony and nature of the questioning suggested sale opponents were building a record for use in likely appeals.
The latter part of Thursday's hearing focused on the decision to close 789 dealerships. Nardelli struggled to pinpoint how much the closings would save the company and said bankruptcy presented an opportunity to bring forward a long-term plan to trim the number of dealerships.
Despite the length of the sale hearings, the case has sailed through court, largely thanks to government financing of the bankruptcy and a willing buyer in Fiat.
To preserve cash, Chrysler shut its operations when it filed for bankruptcy, which added to the urgency of the case.
Nardelli and other witnesses argued the quick sale was critical to preserve the value of its operations, save more than 100,000 auto-related jobs and prevent further shock waves.
The sale would free the automaker of $6.9 billion of loans and cumbersome retiree benefits that it blamed for its struggles against more nimble competitors.
By teaming up with Fiat, Chrysler could expand beyond the U.S. market and gain technology needed to diversify a product line now heavily weighted toward trucks and SUVs.
The case is In re Chrysler LLC, US Bankruptcy Court, Southern District of New York, No. 09-50002.
(Additional reporting by Chelsea Emery, Emily Chasan and Ajay Kamalakaran; Editing by Steve Orlofsky)