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A bankruptcy judge will rule Wednesday on whether Chrysler can terminate the
franchise agreements of 789 of its dealers as part of its ongoing restructuring.
U.S. Judge Arthur Gonzalez is expected to hear testimony from Chrysler LLC
executives, as well as dealers during the hearing.
Auburn Hills, Mich.-based Chrysler maintains that it needs to reduce its dealer
base to a leaner network of about 2,400 dealers in order to emerge from Chapter
11 bankruptcy protection as a stronger company.
Chrysler claims that many of the dealerships in question, which amount to about
a quarter of its dealer population, were chosen because they are either
unprofitable or located too close to other Chrysler dealerships.
But the dealers argue that they don't cost the automaker anything, just make it
money by selling Chrysler's cars and trucks.
They maintain that if Gonzalez approves Chrysler's motion it will result in the
shuttering of hundreds of dealerships and thousands of workers will lose their
jobs.
A group representing about 300 of the dealers slated to lose their franchises
have filed an objection. They also earlier objected to Chrysler's motion to sell
the bulk of its assets to a group led by Italy's Fiat Group SpA, because it was
tied to the plan to eliminate the dealerships.
A trio of dealers testified during the third and final day of the sale hearing,
saying that their businesses would mostly likely be forced to close if they lost
their franchises.
In addition to the dealers group, attorneys for several individual dealers have
also filed objections.
Separately, the U.S. Court of Appeals for the Second Circuit agreed late Tuesday
to hear an appeal by a trio of Indiana state pension and construction funds of
Chrysler's sale to Fiat. Arguments will begin Friday, The Wall Street Journal
said, citing the court's order.
Gonzalez said in his ruling late Sunday that a speedy sale was needed to keep
the value of Chrysler from deteriorating and would provide a better return for
the company's stakeholders than if it had chosen to liquidate.
But the Indiana funds, which own $42.5 million of Chrysler's $6.9 billion in
secured debt, aggressively objected, saying the sale does not provide a big
enough return for secured debt holders, while paying off unsecured stakeholders.
Chrysler requested Monday that the sale be certified for immediate appeal in
order to move the case quickly to U.S. District Court. It's unclear how much the
appeal could delay the sale's closing and Chrysler's emergence from court
oversight.
Chrysler has said that any delay could cause the deal with Fiat to crumble, as
the Italian automaker has the option of pulling out if the sale does not close
by June 15.
Also on Wednesday, the Senate Commerce Committee is scheduled to hold a hearing
on GM and Chrysler dealership closings. |
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