Chrysler looks set to clear its last major hurdle in its sprint through bankruptcy court on Wednesday, 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 (FIA.MI), labor and the U.S. and Canadian governments, in exchange for $2 billion paid to its lenders.
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, a goal once thought impossible for a company as complicated as Chrysler.
The compressed time frame has forced the court to accelerate hearings and cut notice periods short. Meanwhile, lawyers trying to block the sale had to scramble to gather testimony on Tuesday as the hearing approached.
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 can expand beyond the U.S. market and diversify a product line now heavily weighted toward trucks and SUVs.
The government provided emergency loans to Chrysler before the bankruptcy and nearly $5 billion financing to carry it through the Chapter 11 reorganization, which has proven contentious.
"The government has behaved very much like any other principal who was investing money in a troubled situation for the purposes of promoting a debtor's reorganization and obtaining control of the entity," said Richard Hahn, co-chair of Debevoise & Plimpton LLP's Bankruptcy & Restructuring Group. "The government has used its leverage very effectively."
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 on Wednesday will probably come as a surprise.
On Tuesday, a U.S. federal judge denied a request by a group of Indiana pension funds that had sought to delay the hearing on Chrysler's sale and move the bankruptcy case to district court. The funds had argued the government exceeded its authority in the case.
"Of the objections I've heard of, none will stop the entry of the (sale) order tomorrow," said Hahn. "It all sounds sort of like the background noise you would have in a large 363 sale of this sort."
The case is In re Chrysler LLC, US Bankruptcy Court, Southern District of New York, No. 09-50002.
