10 June 2009
Fiat, Chrysler, Obama yes; pension funds no
After temporarily blocking the Chrysler bankruptcy, the U.S. Supreme Court stepped aside Tuesday and let the move proceed.
That is a victory for the Obama administration and its plan to remake the American auto industry by pushing both Chrysler and General Motors Corp. through quick and painful restructurings under Chapter 11 bankruptcy.
The Wall Street Journal reported a group of Indiana pension funds sued to stop the plan saying the government’s heavy-handed treatment of creditors in the case could chill private lending to distressed firms and alter the rules of bankruptcy reorganizations.
Chrysler now appears set to exit bankruptcy as soon as today.
Chrysler’s restructuring calls for the company to form an alliance with Fiat, the Italian automaker. A United Auto Workers retiree healthcare trust fund would hold 55% of the new Chrysler’s equity, and the U.S. and Canadian governments would hold small stakes. Fiat can build its initial stake to 35% through the introduction into the U.S. market of certain technologies, including a 40-miles-per-gallon engine by 2012.
The pension and other funds stood to lose $12 million from a $17 million Chrysler investment.
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