Supremes slap freeze on Chrysler deal

Italian auto maker Fiat has vowed to stick with plans to forge an alliance with distressed US group Chrysler after a US Supreme Court decision put a temporary freeze on the transaction.

"Fiat is committed (to a tie-up with Chrysler) even after June 15," a Fiat spokesman told AFP. The company is entitled to pull out of the deal after that date if Chrysler’s recovery plan has not been fully approved.

Chrysler filed for bankruptcy protection in late April and a New York court on May 31 approved the company’s reorganisation and agreed to allow the tie-up with Fiat to proceed.

But the US Supreme Court on Monday put a temporary freeze on the plan, which would allow Chrysler to emerge from bankruptcy as a new entity.

A group of Indiana pension funds had opposed Chrysler’s sale to Fiat and filed the emergency appeal with the Supreme Court.

The court order, signed by Justice Ruth Bader Ginsburg, will now allow the justices to consider whether to allow a full hearing on the legal issues.

Without the stay, the deal could have been closed as of 2000 GMT Monday.

The rescue plan gives Fiat a 20 percent stake in Chrysler with a possibility of increasing that share.

In return, Fiat will allow access to its technology to enable the US car maker to make the smaller, greener cars that are increasingly in demand.

Fiat shares were showing a loss of 0.46 percent at 7.5 euros in mid-morning trading on the Milan stock exchange which was up 1.10 percent overall.

3 Responses to "Supremes slap freeze on Chrysler deal"

  1. JerryG  June 9, 2009 at 12:48 pm

    I know Article 1 of the Constitution establishes the authority of Congress to draft bankrupty laws, but, does anyone know which article of the Constitution the Indiana pension fund group is using as the basis of their appeal to the Supreme Court?

  2. woody188  June 9, 2009 at 2:01 pm

    It’s not Constitutional Law, it’s precedent. There are rules established by Congress for who gets paid from asset sales first and the pension fund would have traditionally been included but under Obama’s expedited (and probably illegal) plans they were locked out and looking at losing millions.

    Besides, Fiat wasn’t paying anything for nearly $2 billion of Chrysler’s assets. Am I the only one that finds that disturbing?

    Well me and some pension funds at least…

  3. adamrussell  June 10, 2009 at 1:50 am

    I believe the question is whether the union pensions are to be considered as a paycheck or a contract. Traditionally the employee’s paychecks comes first in a bankruptcy. It could be argued that the pension owed is part of their pay package. They worked, some for 40 years, and are owed that pay for work already done.

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