NEW YORK (Reuters) - Chrysler expects to close its sale of most assets to Fiat as early as Friday, its chief executive told a bankruptcy hearing which is considering whether to approve the transaction.
The automaker seeks approval to sell its stronger operations to a “New Chrysler” owned by Italy’s Fiat FIA.MI, labor unions and the U.S. and Canadian governments, in exchange for $2 billion paid to lenders.
Approval would be a victory for the White House, which had been criticized by many bankruptcy specialists for setting a seemingly unrealistic time frame of 30 to 60 days in which to bring the automaker’s operations through Chapter 11.
Nardelli was answering lawyers’ questions when he mentioned that he expected the sale to close on Friday.
The comment appeared to surprise the attorney who was questioning him, who was representing Indiana pension funds opposed to the Fiat deal.
Tom Lauria of White & Case asked Nardelli if he expected the sale to close with necessary antitrust approval, which he said it did.
During questioning about liabilities being transferred to the New Chrysler, Nardelli pointed out that while the pensions of hourly workers were carried out of bankruptcy, others were not. “Lee Iacocca lost his pension,” he said, referring to the automaker’s former chairman.
Lawyers opposing the sale said on the sidelines they expect the judge to approve the sale, even though hundreds of objections had yet to be heard. Lauria and other attorneys said they will ask to have the closing postponed to give district court time to hear an appeal.
Opponents of the sale focused testimony on last-minute negotiations to avoid bankruptcy, the role of the U.S. government and various liquidation appraisals performed on the company.
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.
Those opposing the sale include some of 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.
Lawyers for Chrysler led Nardelli to discuss the necessity of government funding to prevent what management said would have been a “freefall” liquidation, and steps to find alternatives.
Nardelli described how he was denied a last-minute request by debtholders to meet so he could explain the final offer before a government deadline to reach a deal expired.
“We turned every stone, exhausted every option,” said Nardelli. “As painful as this was, in 38 years this was the first time I had to go into bankruptcy — and it’s not something I want to get good at — but it best served all the constituencies.”
Opponents of the sale tried to focus Nardelli’s testimony on the role of the government’s auto task force, which appeared from e-mails read in court to have intervened to discourage last-minute attempts to avoid bankruptcy.
One e-mail from a member of the auto task force said “it’s over” as an adviser to Chrysler sought to find a way to reach a settlement on the day before the Chapter 11 filing, when it appeared $250 million was needed for an agreement.
“The president doesn’t do second-round negotiations,” the e-mail read, according to Lauria.
Lauria also read several e-mails in which Chrysler executives appeared to indicate they felt the U.S. Treasury had taken control of negotiations.
Nardelli emphasized that the U.S. government was the only source of funds to keep Chrysler from liquidation, which he said would have been “cataclysmic.”
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.
The automaker argued a quick sale was critical to preserve the value of its operations, save more than 100,000 auto-related jobs and prevent further economic shock waves.
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 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.
Reporting by Tom Hals and Chelsea Emery; additional reporting by Emily Chasan; Editing by Lisa Von Ahn and Matthew Lewis