May 21, 2009 at 1:00 am

Chrysler objections mount

Filings show pensioners, other groups fear asset sales will leave them holding nothing

A flurry of objections in the Chrysler LLC bankruptcy case continue to be filed in advance of a hearing next week to approve a tie-up with Fiat SpA.

The latest bankruptcy court filings submitted in New York come from various groups including the city of Auburn Hills, which says it is owed $1.9 million in property taxes, to worried pensioners scared about their future, to lawyers concerned that bankruptcy will wipe out dozens of product liability lawsuits.

Chrysler wants to sell what it sees as good assets to a new Chrysler-Fiat company, which could exit bankruptcy this summer. The bad assets are expected to languish in court for what could be years and likely will recoup only pennies on the dollar.

Suppliers are disputing Chrysler's figures about how much they are owed; dealers are fighting the termination of their franchise agreements that will take place on June 9; salaried retirees with benefits plans that are no longer being supported are arguing for help; as are laid-off salaried employees who saw their severance payments end with the bankruptcy filing.

Chrysler won approval Wednesday to use $4.96 billion in government financing to help it operate during bankruptcy. But, Chrysler doesn't want to use that money to pay those debts.

Lawyers for Public Citizen and other plaintiffs filed a motion seeking to prevent Chrysler from dropping personal injury lawsuit and product liability claims in bankruptcy.

"It would leave both consumers and personal injury victims without recourse against the products' manufacturer, the entity which is best situated to address their complaints in a fair and reasonable manner," said a court filing from a San Francisco law firm and Public Citizen.

Lawyers also argue that the inability to sue over vehicle problems could drop the resale value of Chrysler vehicles.

A group of Indiana pension funds urged the bankruptcy court to name an examiner to review Chrysler's business decisions, arguing Chrysler has failed "meet its fiduciary duties and the full extent to which the United States Government has exceeded its statutory and constitutional authority by dominating and controlling both (Chrysler's) business and the bankruptcy proceedings."

The pension funds seeking appointment of an examiner include the Indiana State Teachers Retirement Fund, the Indiana State Police Pension Trust and the Indiana Major Moves Construction Fund. They are among the holders of $6.9 billion in senior secured Chrysler debt.

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