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Chrysler wants to sell most assets to Fiat

NEW YORK — Attorneys for Chrysler LLC said the company will file a motion by this morning to sell substantially all of its assets to Italian automaker Fiat Group SpA, but that won't include eight plants, including five the automaker said it will shutter by the end of next year.

While Chrysler faced its first hearing Friday in bankruptcy court in Manhattan, court documents showed the ailing automaker plans to close plants in Michigan, Missouri, Ohio and Wisconsin that employ about 4,800 people. Chrysler said they will be offered jobs at other plants.

Judge Arthur Gonzalez approved a series of motions at the swift hearing, launching a chain of events designed to ensure Chrysler's bankruptcy process is the quick and "surgical" one the company and the U.S. government have promised.

But what could prove to be the case's biggest challenge still lies ahead. Chrysler must eventually deal with creditors who refused to come to a deal that would have erased much of the automaker's debt and might have avoided a bankruptcy filing in the first place.

Another hearing was scheduled for Monday morning, in which Chrysler attorneys will ask Gonzalez to let the company start using $4.5 billion in loans from the U.S. and Canadian governments to keep operating under bankruptcy protection.

Chrysler attorney Corinne Bal said the loans and the sale to Fiat represent "an important lifeline" for Chrysler's dealers, supplies and customers.

"We have to move at a good speed throughout this proceeding," she told Gonzalez.

By the end of the hearing, the judge had decided six motions in about an hour.

Chrysler, the nation's third-largest car manufacturer, filed for bankruptcy protection Thursday after a group of creditors defied government pressure to wipe out the automaker's debt. The company plans to emerge in as little as 30 days as a leaner, more nimble company, with Fiat potentially becoming the majority owner.

In return, the federal government agreed to give Chrysler up to $8 billion in additional financing, on top of the $4 billion the company already has received.

Ball said lawyers on Monday would ask to set a date for the first hearing on the sale of Chrysler's assets to the "new Chrysler." In bankruptcy, assets are sold in a two-part process during which the court asks for competing bids. None are expected in Chrysler's case, since documents show the company already tried to form alliances with dozens of companies, including Nissan-Renault, Toyota, Honda, Volkswagen and even General Motors Corp.

Heidi Sorvino, bankruptcy partner at Smith, Gambrell & Russell LLP, said a sale could be completed in 30 to 60 days.

Until the deal with Fiat closes, the automaker plans to idle all of its U.S. plants. Chrysler's Canadian assembly plants also halted production Friday because of parts shortages stemming from the U.S. shutdown.

At Friday's hearing, Gonzalez approved Chrysler's motion to allow the automaker to pay $48.8 million in employee and contract worker pre-bankruptcy wages, benefits and businesses expenses. The motion also references an estimated $86 million in employee vacation benefits it may not ultimately have to pay.

The judge also approved Chrysler's motions that will let it continue to honor its warranties and continue its current banking practices.

Chrysler wants to sell most assets to Fiat 05/01/09 [Last modified: Friday, May 1, 2009 9:51pm]
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