MILAN (AP) -- The Italian automaker Fiat says it won't walk away from a deal to acquire a controlling stake in Chrysler despite a U.S. Supreme Court stay on the sale.
Fiat has the legal right to walk away from the deal if the sale is not completed by June 15. But a spokesman for Fiat said today that the automaker will stay on board despite the new delay.
The U.S. Supreme Court decision on Monday to hear a challenge by three pension and construction funds could scuttle the sale. But the delay could also only be temporary. Justice Ruth Ginsburg could decide on her own to end the stay, or ask the full court to decide.If Fiat were to walk away, Chrysler would have little option but to liquidate.
EARLIER: Indiana at center of Chrysler sale delay
Thousands of Chrysler autoworkers in Kokomo and across the nation were left in limbo Monday when Indiana Treasurer Richard Mourdock won a bid to get the U.S. Supreme Court to slow down and possibly overturn the sale of the struggling automaker to Italian carmaker Fiat.
The development raised questions over how soon the court will resolve the matter and whether the deal might be scuttled if it is not settled quickly.
Chrysler has said the sale must close by June 15 or Fiat has the option to walk away, leaving the Michigan company with little option but to liquidate. That scenario would throw enormous uncertainty over 6,000 Chrysler workers in Kokomo and tens of thousands nationally.
The sale hit a roadblock Monday when Supreme Court Justice Ruth Bader Ginsburg issued a delay just minutes before 4 p.m., when the deal was to become official.She didn't indicate how long the delay would be. Her one- sentence order said the sale is "stayed pending further order," indicating the delay may be temporary. She could decide on her own whether to end the delay, or she could ask the full court to decide.
Some legal scholars said they doubted the court would resolve the issue within a week, as Chrysler wants.
"If the court goes ahead and asks for a hearing, it would be hard to see how they could do it quickly," said Gerard Magliocca, who teaches constitutional law at the Indiana University School of Law-Indianapolis. "The court isn't known for rushing these kinds of things."
Mourdock, the state's Republican treasurer, has been fighting the sale, claiming it unfairly favors Chrysler's unsecured stakeholders ahead of secured debt holders such as the state's pension funds. Indiana has funds worth $42.5 million in Chrysler's secured loans, making it a small player among bondholders who own $6.9 billion in secured loans.
Mourdock previously failed to convince the bankruptcy judge and an appeals court that the carmaker's spinoff plan is illegal. But now he has another shot at pressing his case.
In an interview Monday afternoon, he said his "heart goes out" to all the Chrysler workers whose future is now uncertain. But he said he had no choice but to challenge the deal because the law says secured bondholders should be favored ahead of unsecured bondholders, such as unions. He added that the deal would cause havoc in the bond market if investors saw that their investments suddenly were given unfavorable status.
"When one of the most liberal justices on the Supreme Court (Ginsburg) says, 'Time out,' I think it says a lot about this issue," Mourdock said. "The question is whether the law is going to be obeyed."Mourdock has picked up support from some consumer groups, including Public Citizen and the Center for Auto Safety. They oppose the bankruptcy sale for their own reasons, saying it would allow a "new Chrysler" to emerge from bankruptcy without taking any responsibility for people hurt by defective Chrysler vehicles.
The Indiana Democratic Party called Mourdock's move a "partisan campaign" that threatens the future of Chrysler jobs.
City and economic development officials in Kokomo said the court's decision only extends the uncertainty in the north-central Indiana city, where four Chrysler plants employ about 6,000 workers.
"Delays probably are not going to be in the best interest of Kokomo," said Jeb Conrad, president of the Kokomo/Howard County Chamber of Commerce. "We've got facilities and people ready to go to work. It can be detrimental to not have a resolution."
Kokomo City Councilman Mike Karickhoff expressed hope the issue could be decided quickly.
Chrysler claims the agreement with Fiat is the best deal it can get for its assets and is critical to the company's plan to emerge from bankruptcy protection. The company said it has no other offers and would be forced to liquidate if the deal hits a roadblock.
But some business law observers said they wonder whether Fiat and Chrysler really would walk away from a deal at this point.
"If Fiat likes Chrysler for strategic reasons, and under these terms, then I don't think they would walk away because of a month delay for a Supreme Court hearing," said Nicholas L. Georgakopoulos, a law professor specializing in mergers and bankruptcy at the IU School of Law here.
Indiana also is challenging the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy protection financing. They say the government did so without congressional authority.
No comments:
Post a Comment