Late Sunday night, U.S. Bankruptcy Judge Arthur Gonzalez approved the sale of most of Chrysler's assets to Italian Automaker Fiat S.p.A., as contemplated in the Master Transaction Agreement between the two companies. Under the terms of the sale, a Voluntary Employee Benefit Trust, organized by the UAW, will initially hold the largest stake, with Fiat, the U.S. Treasury and the Canadian government all holding smaller stakes. Judge Gonzalez stated that the United States and Canada “have made the determination that it is in their respective national interests to save the automobile industry.”
Chrysler will receive $2 billion to distribute to secured lenders who collectively hold $6.9 billion in loans. Many of these lenders supported the transaction. Fiat will have the option to walk away from the deal if the transaction is not completed by June 15, 2009.
Among other petitioners, a group of Indiana-based pensioners and secured lenders, including the Indiana State Teacher’s Retirement Fund and the Indiana State Police Pension Trust, had previously moved to withdraw the matter from the Court, claiming that the transaction was a violation of federal law. “The Government’s action is not authorized by any statute…and violates the unambiguous provisions of the Emergency Economic Stabilization Act and the Constitution of the United States,” argued the pensioners. They are expected to appeal the decision.
In a statement released this morning, President Obama lauded the sale’s approval. “The decision by Judge Gonzalez of the United States Bankruptcy Court for the Southern District of New York to approve the Chrysler sale transaction paves the way for the new Chrysler to successfully emerge from bankruptcy as a new, stronger, more competitive company for the future,” Obama said. “Tens of thousands of American jobs will be saved by this extraordinary effort.”