June 7, 2009
The government-orchestrated bankruptcy of Chrysler and creation of a new company isnt final just yet, and two groups are going to court this week to slam on the brakes.
A small group of Chrysler bondholders Saturday filed an appeal with the U.S. Supreme Court, asking the high court to block the sale from closing this week while they continue the appeals process. The plaintiffs are a group of Indiana pension funds who are challenging the asset allocations under the new corporate structure.
Italian carmaker Fiat is acquiring most of Chryslers stock, with another large segment to be owned by the United Auto Workers Union health care fund. Bondholders have seen the value of their loans to Chrysler slashed under the deal to about 29 cents on the dollar.
Early Sunday, meanwhile, a coalition of consumer groups also filed for a stay, claiming the deal would shield New Chrysler from injury lawsuits stemming from accidents involving existing Chrysler vehicles. Chrysler earlier agreed to honor consumers' Lemon Law rights.
If granted, a stay would provide additional time for the pensions and consumer groups to lodge a formal appeal before the Supreme Court.
Meanwhile, Chrysler dealers who had their franchises revoked in the bankruptcy are back in court this week trying to reverse the carmakers decision. In emotional testimony late last week, some dealers slated for closing argued the selection process was arbitrary, and in some cases retaliatory.
The dealers may have a tough time making their case. New York Bankruptcy Judge Arthur Gonzalez suggested that Chrysler had made a strong argument for the need to reduce the number of dealers selling its cars.
Chrysler explained its decision to close dealerships by saying those targeted for closure werent meeting minimum sales targets, or maintaining high enough levels of customer service or capitalization. Chrysler is closing 789 of its 3,200 dealerships.
As of now, Gonzalez has approved the sale of Chryslers assets to a new company owned primarily by Fiat and the UAWs health care fund.
