Chrysler looks set to clear its last major hurdle in its sprint through bankruptcy court as soon as Thursday, when a judge is expected to overrule more than 340 objections and approve its sale to a group that includes Fiat.
Less than 30 days after it filed for bankruptcy, the automaker seeks approval to sell its stronger operations to a New Chrysler owned by Italy's Fiat
Ten hours of hearings on Wednesday centered on cross-examining Chrysler's former president and vice chairman, Tom Lasorda; financial advisor Robert Manzo of Capstone Advisory Group; and Alfredo Altavilla, the chief executive of Fiat's powertrain business.
That testimony will be used in Thursday's hearing, when hundreds of objections to the sale will be heard. The judge said the hearings might stretch into Friday.
Those opposing the sale include the nearly 800 dealers Chrysler wants to shutter, as well as debtholders and retirees. Suppliers, which are owed more than $5 billion, have also objected.
The sale will complete the White House's goal of reorganizing the automaker in 30 to 60 days, largely thanks to government financing of the bankruptcy and Fiat's role as a buyer. Chrysler shut its operations when it filed for bankruptcy, which lent weight to the argument that the sale needed to be approved quickly.
The compressed time frame has forced the court to accelerate hearings and cut notice periods short. Lawyers trying to block the sale were scrambling to gather complete depositions on Tuesday as the hearing approached and to dig through hundreds of thousands of documents.
Chrysler argued the quick sale was critical to preserve the value of its operations, save more than 100,000 auto-related jobs and prevent economic shock waves from sweeping across the Midwest, which is already mired in a deep recession.
The sale would free the automaker of $6.9 billion in 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 diversify a product line now heavily weighted toward trucks and SUVs.
Much of the questioning focused on whether Chrysler explored alliances with automakers aside from Fiat and the role of the U.S. Treasury.
The government provided more than $8 billion in emergency loans to Chrysler before the bankruptcy and nearly $5 billion financing to carry it through the Chapter 11 reorganization, which has proven contentious.
Manzo testified that banks rejected an offer from Chrysler prior to bankruptcy to swap their secured debt for half the equity in a restructured Chrysler. The banks chose instead to negotiate only with the government.
Glenn Kurtz, an attorney for White and Case which is representing Indiana pension funds opposed the sale to Fiat, read a March email in which Manzo appeared to cheer a proposal from the government to eliminate the banks secured debt after they rejected Chrysler's offer of an equity stake.
Oh baby!!!!!!!! Manzo wrote. They get what they deserve.
Attorneys for the company, as well as those objecting to the sale, have credited Judge Arthur Gonzalez for swiftly hearing objections and generally overruling them. Any ruling to stop or delay approval of the sale will come as a surprise.
The hearings started with Gonzalez rejecting a request to postpone the hearings to give more time to opponents, including the Indiana funds, to review the hundreds of thousands of documents received in the last few days as part of the discovery process.
That discovery process turned up one email that seemed to show Chrysler's attorneys from the Jones Day firm questioning the government's demand for a tight schedule for the sale process. The email called the accelerated schedule a mistake that risked the loss of credibility and threatened to stuff the judge.
The opponents of the sale may still appeal if it is approved, although there is a risk the sale may close during the appeal process.
Of the objections I've heard of, none will stop the entry of the (sale) order, said Richard Hahn, a bankruptcy attorney with Debevoise & Plimpton LLC in New York. It all sounds sort of like the background noise.
The case is In re Chrysler LLC, US Bankruptcy Court, Southern District of New York, No. 09-50002.
(Reporting by Tom Hals and Chelsea Emery; editing by Tim Dobbyn, Richard Chang)