NEW YORK – The U.S. Supreme Court Tuesday night declined to hear an appeal from opponents of the sale of Chrysler’s assets to Italian automaker Fiat, clearing the way for the government-backed transaction to take place immediately.
The order capped a hectic week in which creditors, dealers and others raced to block a deal that now appears destined to become a template for a similar bankruptcy involving General Motors.
Another important piece of Chrysler’s plan fell in place yesterday when a federal bankruptcy judge granted the automaker’s request to sever ties with 789 dealerships.
Together, the rulings allowed the Obama administration to get back on track with its plan to engineer a speedy restructuring of America’s struggling automotive industry, and turn Chrysler and GM into leaner global rivals.
“We are gratified that not a single court that reviewed this matter, including the U.S. Supreme, found any fault whatsoever with the handling of this matter by either Chrysler or the U.S. government,” the Treasury Department said in a statement.
Chrysler plans to sell most of the assets it deems valuable to a new entity run by Fiat and owned in part by the United Auto Workers and the U.S. and Canadian governments. Chrysler’s creditors would split the $2 billion government-provided proceeds from the sale.
A group of Indiana pension and construction funds had opposed that transaction, arguing that the Chrysler sale favored lenders who were much more junior to them. They were joined by consumer groups who complained that the sale would exempt the new Chrysler from past product liability claims.
But the government and Chrysler argued, along with Fiat, that the only alternative to the sale was a liquidation of the automaker, which would result in tens of thousands of job losses.
After four days of competing petitions and responses, the Supreme Court in effect decided to stay out of the case. The unsigned opinion said the “denial of a stay is not a decision on the merits of the underlying legal issues.”
The court said the challengers needed to demonstrate that at least four members of the court were willing to accept the case because it was “sufficiently meritorious” that there was a “fair prospect” a majority of the court would disagree with the lower court’s decision. They also needed to show the harm that would result if a stay were not granted.
“The applicants have not carried that burden,” the two-page opinion concluded.
The court made it clear that its decision affected only the Chrysler dispute: “Our assessment of the stay factors here is based on the record and proceedings in this case alone.”
The deal comes as U.S. Bankruptcy Judge Arthur J. Gonzalez on Tuesday granted Chrysler’s request to shrink its sales network by a quarter. Rejected dealers must now take down promotional materials and billboards with the Chrysler logo. They are no longer allowed to offer repairs or services of Chrysler products as an authorized dealer.
The dealers are moving their fight to Congress. On Tuesday, the Senate Commerce Committee sent letters to GM chief executive Fritz Henderson and Chrysler President Jim Press, demanding answers for the “unwarranted” treatment of dealers. The House Oversight and Investigations Subcommittee is to hold a hearing into the matter Friday. Congressional leaders introduced legislation this week to try to stop hundreds of General Motors and Chrysler dealerships from closing.