Chrysler Chief Executive Robert Nardelli said he expects the sale of the bulk of Chrysler's assets to a group headed by Italy's Fiat Group SpA to close Friday, assuming the judge overseeing the automaker's bankruptcy protection case approves the deal, AP reported.
Nardelli testified in court Thursday that he expects the required U.S. regulatory approvals for the sale to be in place by Friday and international approvals to follow shortly thereafter.
But it's likely that if U.S. Judge Arthur Gonzalez does approve the deal, attorneys representing three Indiana state pension and construction funds, which hold Chrysler debt and are aggressively opposing the sale, will appeal the decision and force the company to postpone the closing. Fiat could back out if the deal doesn't wrap up by June 15.
Chrysler LLC on Thursday began its second day of testimony to convince Gonzalez that selling itself to Fiat was the best way to avoid liquidation. Attorneys for Chrysler say a leaner company could shift more easily to building smaller, more fuel-efficient cars.
But many Chrysler dealers, bondholders and former employees say they are being steamrolled by the exceptionally speedy bankruptcy court proceedings.
If the judge approves the sale, as expected, the automaker could emerge from Chapter 11 bankruptcy protection within weeks, defying observers who said that the company could linger under court oversight for years. Chrysler filed for Chapter 11 bankruptcy protection April 30, 2009.
Meanwhile, Chrysler's U.S.-based rival General Motors Corp. earlier Thursday said a bondholders' committee has agreed to a sweetened deal proposed by the U.S. government to erase the automaker's unsecured debt in exchange for company stock. The deal should help GM reorganize more quickly through Chapter 11 reorganization.
A person familiar with GM's plans said it was "probable" that the company would seek bankruptcy protection on Monday. The person didn't want to be identified because the plans were still under discussion with the U.S. and Canadian governments.
In his testimony Thursday, Nardelli described the events leading up to Chrysler's bankruptcy filing. He said the company attempted to cut costs and restructure itself throughout 2008, but a steep drop in vehicle sales and tight credit proved to be too much, sending the industry into a "death spiral" by summer.
"The bottom fell out," he said.
Nardelli said he favored a plan for a stand-alone company and was disappointed when the government's auto task force gave him to the end of April to join with another automaker if it wanted the government's financial help.
In the days leading up to its filing, Chrysler reached an agreement with most of its bondholders in which they would receive a combined $2 billion in a deal worth 29 cents on the dollar, but some bondholders refused to support it, saying that as secured lenders they deserved more.
Nardelli said Chrysler attempted to negotiate with the holdout debt holders right up until the company's filing, with the Treasury at one point upping its offer by $250 million to $2.25 billion.
In the end, Nardelli said Chrysler officials couldn't justify liquidating the company instead of restructuring, given the number of jobs that would have been lost and communities that would be effected.
"I think it would have had a cataclysmic effect on the industry and the overall economy," he said.
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