UPDATE:Chrysler Running Short Of Cash, Options As Sale Delayed
June 09 2009 - 5:42PM
Dow Jones News
Chrysler LLC is poised to run out of money by July 4 if it fails
to complete the sale of its assets to Italian auto maker Fiat SpA
(FIATY), a deal that has been delayed owing to opposition from
lenders.
A budget, filed with a New York bankruptcy court in early May,
shows the auto maker burning through its $4.1 billion in
debtor-in-possession financing and $400 million in cash collateral
by the end of the week of June 29 as it pays employees and
suppliers, and maintains its plants.
The budget for Chrysler, which filed for Chapter 11 protection
on April 30, took into account that most of the auto maker's
production plants would be idled during the bankruptcy process and
the salaried work force would take up to two weeks of unpaid
vacation.
If the sale doesn't happen by early July, Chrysler would likely
be forced to make even deeper cuts and turn to the Obama
administration for more help, even as the government has said it
won't provide further assistance. Without additional aid, Chrysler
would face liquidation, and the economy would be saddled with tens
of thousands of job losses.
The fate of Chrysler was thrown into limbo Monday when the U.S.
Supreme Court delayed the sale of the U.S. auto maker's assets to
Fiat at the request of several Indiana pension funds and consumer
groups that oppose the transaction. Should the high court maintain
the stay it issued on Monday, the sale process could be delayed for
weeks.
Chrysler declined to comment Tuesday on what its options might
be if the sale is delayed. In a filing at the Supreme Court
Tuesday, the company said "every day past June 15 increases the
risk that Chrysler's business will not be able to restart
successfully."
Fiat has the option of walking away from the deal on June 15.
Following the news from the Supreme Court, Fiat Chief Executive
Sergio Marchionne said his company wouldn't walk away from its deal
to buy Chrysler even if the June 15 deadline is missed.
However, in a filing of its own Tuesday at the Supreme Court,
Fiat said if the sale isn't completed soon, "there can be no
assurance that a replacement transaction could be structured and
agreed that would preserve any aspect of Chrysler as a going
concern."
Fiat has no plans to infuse Chrysler with cash during the
bankruptcy process, and the Obama administration said at the time
of the Chapter 11 filing that it wouldn't provide more funding as
Chrysler wasn't viable without a partner.
A White House official on Monday downplayed the significance of
the latest development, calling it "an administrative extension
designed to allow sufficient time for the Court to make a
determination on the merits of the request for a stay."
Some experts think the government, which has staked its
credibility on getting Chrysler and General Motors Corp. (GMGMQ)
quickly through bankruptcy, would have no choice but to provide
additional assistance.
"I think the government will give them another $1 billion to
keep them going, but keep them on a short leash," said Richard
Tilton, a bankruptcy attorney who participated in Chrysler's 1970's
restructuring. "What alternative do they have?"
More aid for Chrysler would touch off a firestorm from lawmakers
and the public, as well as cast more doubt on the Obama
administration's ability to steer GM through a similar "quick"
bankruptcy process. GM filed for bankruptcy on June 1.
The government has already injected almost $9 billion in
emergency funding into Chrysler since late last year, and more than
$20 billion into GM.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542;
jeff.bennett@dowjones.com;