Hearing On Whether To Shutter Chrysler Dealers Moved To Thursday
03 Juni 2009 - 5:27PM
Dow Jones News
A bankruptcy hearing on whether to shutter a quarter of Chrysler
LLC's dealers will begin a day later than expected.
The hearing, originally scheduled for Wednesday, is expected to
begin at 8 a.m. EDT Thursday before U.S. Bankruptcy Judge Arthur
Gonzalez in Manhattan, according to a court filing.
The parties will present evidence Thursday and possibly Friday.
Oral arguments on the dealerships are set for Tuesday.
Chrysler is looking to close 789 of its 3,200 dealers as part of
its effort to sell the bulk of its assets to a new company owed in
part by Italy's Fiat SpA (FIATY). The affected dealers accounted
for about 14% of Chrysler's sales last year.
The auto maker has said the move is necessary because its dealer
network is too big and dealerships in some markets overlap.
Chrysler also is focusing on putting its three brands under one
roof, rather than having standalone Dodge, Chrysler or Jeep
franchises.
Gonzalez approved the sale late Sunday, but a group of Indiana
pension funds has appealed his order.
Under Chrysler's plan, Fiat would initially own 20% of the new
company, though it would have the option of increasing its stake to
as much as 51%. The United Auto Workers union would initially get a
55% stake, while the U.S. and Canada, which are lending Chrysler
$4.9 billion during the bankruptcy, would own 8% and 2%,
respectively.
The Indiana funds claim the sale of Chrysler is
unconstitutional, saying the plan upends the rights of senior
lenders to be paid off before junior creditors and the Treasury
Department doesn't have the authority to lend bankruptcy financing
under the Troubled Asset Relief Program.
Oral arguments before the U.S. Second Circuit Court of Appeals
in New York are set for Friday afternoon.
"We are pleased that the Court of Appeals in setting this
schedule and has recognized the sense of urgency Chrysler has to
preserve and protect its going concern value. We look forward to an
expeditious conclusion to this matter and to getting back to
building vehicles," Chrysler said in a statement Wednesday.
Separately, Chrysler is scheduled to ask Gonzalez Wednesday to
approve a settlement involving former parent Daimler AG (DAI),
existing owner Cerberus Capital Management, and the Pension Benefit
Guaranty Corp., the government's pension watchdog.
Under the deal, which is a key piece of Chrysler's restructuring
plan, Daimler will forgive $1.9 billion in loans to Chrysler and
Cerberus will forgive a $500 million loan to the auto maker,
according to court documents.
In addition, Daimler has agreed to contribute $600 million to
Chrysler's pension plans during a two-year period. The PBGC has
estimated Chrysler's pension plans are underfunded by $10
billion.
Later Wednesday, General Motors Corp. (GMGMQ) Chief Executive
Fritz Henderson and Chrysler LLC President Jim Press are expected
to testify in Washington on how their companies' restructuring
plans will affect car dealers. GM filed for bankruptcy protection
Monday.
The hearing, set for 2:30 p.m. EDT, was called by U.S. Sen. John
Rockefeller, D-W.Va., chairman of the Senate Commerce, Science and
Transportation Committee, who has voiced concern about the auto
companies' plans to drastically reduce their dealer networks.
The hearing comes amid a major lobbying campaign by dealers on
Capitol Hill to pressure lawmakers to rein in the plans.
Several auto dealers are also scheduled to testify, including
John McEleney, chairman of the National Automobile Dealers
Association.
-By Chad Bray, Dow Jones Newswires; 212-227-2017;
chad.bray@dowjones.com
(Jeff Bennett in Detroit and Josh Mitchell in Washington
contributed to this story.)