NEW YORK — Attorneys for Chrysler LLC will ask a federal bankruptcy judge Monday to let the ailing automaker start using a new infusion of $4.5 billion in loans from the Treasury Department so it can operate under bankruptcy protection.
At a hearing Friday in Manhattan bankruptcy court, Chrysler attorney Corinne Ball said the company will also file its motion to sell substantially all of its assets to Italian automaker Fiat Group SpA before this morning.
The moves, along with typical first motions approved at Friday’s hearing, set in motion a chain of events designed to ensure that the bankruptcy process is the quick and “surgical” one that Chrysler and the U.S. government have promised.
“We have to move at a good speed throughout this proceeding,” Ball told Judge Arthur Gonzalez.
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She noted that the company’s restructuring efforts have the support of its dealers, suppliers and most of its lenders.
“I don’t think that any American can doubt that these are extraordinary times,” Ball said. “And we are quite mindful of the view of many experts that no car company can survive in Chapter 11. To that we say, ‘yes we can.’ ”
Documents in Chrysler’s bankruptcy case reveal the automaker’s plans to close five more of its plants by the end of 2010. The plants include the Sterling Heights and Conner Avenue assembly plants in Michigan, and the St. Louis North assembly plant in Missouri. Chrysler’s Twinsburg, Ohio, stamping plant and Kenosha, Wis., engine plant would also close. The plants are among eight that would be left out of a deal for Italy’s Fiat to buy the U.S. carmaker’s most valuable assets in bankruptcy. Instead, the “new Chrysler” would lease the plants then shutter them by December 2010. Attorneys packed the courtroom for Chrysler’s first hearing since it filed for Chapter 11 bankruptcy protection Thursday with an ambitious plan to emerge in as little as 30 days as a leaner company aligned with Fiat.
In the early morning hours before the hearing began, attorneys lined up outside the bankruptcy court for the Southern District of New York under overcast skies with coffee and rain gear in tow of hopes of securing a spot.
The large, windowless courtroom filed up quickly and two overflow rooms with video and audio feeds were opened up to accommodate the crowds.
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 that it may not ultimately have to pay.
Gonzalez also approved Chrysler’s motions that will let it continue to honor its warranties and continue its current banking practices.
Eventually, Gonzalez will have to reach a decision on creditors that hold $6.9 billion of Chrysler’s debt.
Four banks holding 70 percent of the debt agreed to a deal that would give the creditors $2 billion. But a collection of hedge funds refused to budge, saying the deal was unfair and would only return a small fraction of their holdings.
President Barack Obama on Thursday chastised the funds for seeking an “unjustified taxpayer-funded bailout” after Chrysler and his auto task force cleared the company’s other hurdles.
Along with the Fiat deal, Chrysler adopted a cost-cutting pact with the UAW this week.
The White House said Chrysler could come out of bankruptcy in 30 to 60 days. Under normal circumstances, it would be difficult to complete such a large bankruptcy so quickly.
But John Pottow, a University of Michigan professor who specializes in bankruptcy, said the government’s level of involvement is much greater than in a typical corporate bankruptcy.
“If you have the president of the United States who wants something to happen, I think anything’s possible in bankruptcy protection,” he said.
Chrysler’s bankruptcy filing is the latest step in a drastic reordering of the American auto industry, which has been crushed by higher fuel prices, the recession and customer tastes that are moving away from the gas-guzzling SUVs that were once big money makers.