High court keeps Chrysler deal on hold
Reporting from Washington -- The U.S. Supreme Court said today that it needed more time to consider complaints about the government-engineered sale of Chrysler to Fiat, raising the potential that they could halt the deal and force it to be renegotiated.
The justices were acting on a request to stay the sale filed by bondholders who said the move was illegal and unfair to them.
Lawyers for the Obama administration warned the court today against standing in the way. They said Chrysler is losing $100 million a day. Without a deal with Fiat, the nation's No. 3 automaker would face liquidation and a loss of 38,000 jobs and 3,000 dealerships, the government's lawyers said.
Until Monday afternoon, the court had been expected to turn away the last-minute challenge to the bankruptcy deal. Three Indiana pension funds had objected, but they lost before a bankruptcy judge in New York and the U.S. court of appeals.
But at 4 p.m., Justice Ruth Bader Ginsburg issued a one-line order that keeps the deal on hold. She did not say when the court would act on the pending appeals. It would take the votes of five of the nine justices to issue an emergency order to stop the deal. Normally, it takes only four justices to agree to hear a case, but an order stopping a case in progress requires a majority vote.
David Skeel, a professor of corporate law at the University of Pennsylvania, said he was "stunned" the Supreme Court acted to delay the sale, though he believes there are legitimate problems with the Chrysler bankruptcy.
"I'm very encouraged that they did decide to at least take a closer look because the one thing that nobody has really done yet is that. Everything has been so rushed from the minute the sale was proposed," he said.
Skeel said Chrysler's bondholders had a legitimate complaint that their claims were treated worse than those of other creditors, particularly the United Auto Workers union.
"Although the senior lenders are getting less than a third of what they're owed, the employees and the retirees are getting a big chunk of what they're owed," he said. "It sure looks like the sale promises [the union] a fair amount more than they would get in a normal bankruptcy."
The challenges to the deal involve only a comparatively small amount of money, but they raise a large legal and ideological issues. Together, Indiana pension funds say they have $42 million invested in Chrysler, less than 1% of its secured debt.
The bankruptcy judge said, in effect, that these small players should not stand in the way of a deal that could save Chrysler and keep the company in business making cars and trucks.