Way cleared for Chrysler sale

The U.S. Supreme Court cleared the way Tuesday for the sale of Chrysler LLC's assets and its tie-up with Italian automaker Fiat SpA.

The dawn of the new Chrysler Group LLC, as it will be called, could begin as early as today, a low-key transition after 40 days in bankruptcy court and a day after wrenching testimony from dealers, 789 of whom lost their franchise agreements at midnight as part of the downsized company.

"The transaction is expected to close very shortly," Chrysler said in a statement late Tuesday, as it applauded the Supreme Court decision "enabling the previously announced global strategic alliance, forming a vibrant new car company, to proceed."

This begins a new era under the day-to-day control of Fiat and its CEO, Sergio Marchionne, who will also be Chrysler CEO. Swift changes are expected.

Chrysler's speedy trip through bankruptcy court is sure to bolster the Obama administration's confidence that General Motors Corp., which filed for protection June 1, will be able to quickly emerge using a similar asset-sale strategy in a similar time frame.

The Supreme Court in a two-page, unsigned order lifted a delay entered by Justice Ruth Bader Ginsburg Monday. The court offered little explanation, simply saying the petitioners -- a group of Indiana pension funds -- hadn't met their burden to extend the delay.

Chrysler, Fiat and the Justice Department warned the court Tuesday that a significant delay could put the automaker in "grave peril" and that Chrysler's government bankruptcy funding could run out by the end of the month.

The Indiana pension funds, a group of secured creditors holding about $42 million in debt, challenged the sale, claiming the Obama administration improperly put unsecured creditors ahead of them. They also fought the use of the $700 billion Troubled Asset Relief Program to fund the auto rescue.

The court order did not address the merits of the challenge.

The court's decision came after Fiat, Chrysler and the Justice Department filed briefs urging the high court not to accept the case, warning the company might not survive beyond the end of the month without an approved deal. Chrysler said the agreement with Fiat would automatically terminate June 15 if the company hadn't exited bankruptcy.

Analyst Aaron Bragman of IHS Global Insight in Troy said Tuesday that bankruptcy has helped Chrysler shed legacy costs, but it also has lost market share. It will be 18 months until new Fiat-based vehicles will be sold in the U.S.

"The easy part is behind them," Bragman said. "The hard part is surviving with the same showroom when competitors have new products."

The new company needs to make vehicles and generate revenue, as Chrysler has $1.5 billion in accounts payables due within weeks. It has halted production during its bankruptcy and is losing $100 million a day while its factories are idled. Plants could restart at month's end.

The tie-up gives Chrysler access to Fiat's distribution and dealer network abroad -- something that the Obama administration auto task force thinks will immediately help its sales.

It's just the latest near-death experience for Chrysler, the smallest of Detroit's three automakers.

Best chance to emerge

In 1979, Chrysler narrowly avoided bankruptcy after a $1.5 billion government bailout, survived a disastrous nine-year merger with Daimler-Benz that ended in 2007 and two years of private equity ownership by Cerberus Capital Management LP. Last December, Chrysler again avoided collapse only because of a $4 billion government bailout from the Bush administration.

Then on March 30, the Obama auto task force warned the company was too small to survive on its own and faced liquidation if it couldn't complete a quick tie-up with Fiat.

Now, it faces its best -- and likely final -- chance to emerge as a profitable and much smaller automaker.

The company today now has fewer employees than it did in 1934, and is attempting to convince another 3,500 to take buyouts. It also will shutter six more plants by the end of 2010.

It remains heavily tilted toward pickup truck, SUV and larger car production and has few significant new product launches in the short-term pipeline, with the exception of a new Jeep Grand Cherokee next year and plans to introduce electric vehicles.

$6B in aid coming

The U.S. Treasury and Canada and Ontario governments will provide Chrysler with $6 billion in exit financing to help it ride out dramatically lower industry sales -- on top of the more than $7 billion it has received to date.

The new company will be owned 55 percent by a United Auto Workers health care trust fund, and 20 percent by Fiat SpA, which can obtain another 15 percentage points by meeting three benchmarks. Fiat isn't required to pay for its stake, but it must contribute small car technology. The UAW will not have voting rights control over Chrysler.

The deal will leave Chrysler's "bad assets," including eight U.S. auto plants and the terminated dealers, in bankruptcy to be sold off over time.The management style, right down to product development and manufacturing, will bear the stamp of global partner Fiat.

Marchionne and Alfredo Altavilla, Fiat head of business development, will be on the board, whose new chairman is Robert Kidder formerly of Duracell.

Marchionne is a turnaround specialist himself and will apply the same practices at Chrysler -- which means there will be more changes to come, including personnel.

The White House hailed the decision.

"We are gratified that not a single court that reviewed this matter, including the U.S. Supreme (Court), found any fault whatsoever with the handling of this matter by either Chrysler or the U.S. government," White House spokeswoman Amy Brundage said. "We are delighted that the Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker."

dshepardson@detnews.com">dshepardson@detnews.com (202) 662-8735 Christine Tierney contributed.