Chrysler Outlines Bankruptcy Plans, Idles Plants
Friday, May 1, 2009; 2:18 PM
NEW YORK, May1 -- Lawyers for Chrysler told a bankruptcy judge here this morning that the automaker has idled its plants, kicking off a "surgical" process President Obama has vowed will give Chrysler a new lease on life.
In a standing-room only courtroom in Lower Manhattan, lawyers for Chrysler told U.S. Bankruptcy Judge Arthur Gonzalez that speed was of the essence. In papers filed today, Chrysler outlined a plan to emerge from bankruptcy within 60 days as a new company that will be owned by its workers, the government and Fiat. Some have challenged the timeline as overly ambitious.
"I don't think that any American can doubt that these are extraordinary times," said Corinne Ball, the lead attorney for Chrysler. "And we are quite mindful of the view of many experts that no car company could survive in Chapter 11. To that we say, 'yes, we can'."
Ball told the judge that Chrysler would file motions later today seeking court approval to sell its assets to Fiat. The next hearing on the case was scheduled for Monday, when Chrysler will ask for permission to begin using $4.5 billion in loans from the federal government.
Gonzalez, a veteran who oversaw the Enron and WorldCom bankruptcies, approved all of Chrysler's motions presented today, including its request to keep paying its employees and to continue to honor warranties to customers. The hourlong hearing was briefly recessed when a woman in the audience fainted and paramedics arrived.
Chrysler, the nation's third-largest automaker, landed in bankruptcy court Thursday after the Obama administration's marathon effort to avert a filing fell apart. Obama, during a television address, placed the blame squarely on a small group of lenders -- hedge funds and other financial firms -- that rejected the government's final offer to settle their claims against Chrysler out of court. He said the "small group of speculators" were "refusing to sacrifice like everyone else" and wanted "to hold out for the prospect of an unjustified taxpayer-funded bailout." The government had offered about 33 cents on the dollar for their loans.
Now largely under government control, Chrysler will seek in court to strip itself of its overwhelming debts. Then, according to the administration plan, the company will get roughly $10 billion in new government aid and be merged with Italian automaker Fiat.
While Obama promised a quick bankruptcy, and administration officials said they hoped it could be done in 30 to 60 days, many in the field warned that it could take much longer because of the size and complexity of the case.
Each passing day could weaken the company's prospects if customers and suppliers shun the brand. Chrysler announced yesterday that it is stopping production across the country for 30 to 60 days to reduce inventories. Because the United Auto Workers renegotiated its contract, cutting supplemental unemployment benefits, workers affected by the shutdown will receive a portion of their regular pay.
In court today, Ball said the company's restructuring plan has the support of its dealers, suppliers and "responsible lenders" who had agreed to make concessions.