[1][2] The court filing occurred upon failure of the company to come to an agreement with its creditors for an outside-of-bankruptcy restructuring plan, by the April 30 deadline mandated by the federal government.
At the time, Chrysler was controlled by the private investment company, Cerberus Capital Management, which, along with other investors, purchased a majority stake in 2007.
[3] On Sunday, May 31, 2009, bankruptcy judge Arthur J. Gonzalez approved a proposed government restructuring plan and sale of Chrysler's assets.
The sale allows most of the assets of Chrysler to be purchased by a new entity in which Fiat would own 20%, and the autoworker's union retirement health care trust (voluntary benefit association "VEBA") 55%, with the U.S. and Canadian government as minority stakeholders.
[7][8] According to the two-page decision and order, the Indiana funds "have not carried the burden" of demonstrating that the Supreme Court needed to intervene.
Under the terms of the potential agreement, Fiat could take a 35% stake in Chrysler and gain access to its North American dealer network in exchange for providing Chrysler with the platform to build smaller, more fuel-efficient vehicles in the U.S. and a reciprocal access to Fiat's global distribution network.
[11] By mid-April, as talks intensified between the two automakers to reach an agreement by a government-imposed deadline of April 30, Fiat's proposed initial stake was reported to be 20% with some influence on the structure of top management of the company.
Chrysler said the union agreement "provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U.S. Treasury Department.
[1][14][2][15] Both the White House and Chrysler expressed hope for a "surgical" bankruptcy lasting 30 to 60 days, with the result of reducing the company's liabilities and post-bankruptcy emergence in stronger financial shape.
Prior to the bankruptcy filing, Chrysler had received US$4.5 billion in financing from the U.S. government, under a George W. Bush administration plan, in December 2008, after Congress declined to approve legislation to provide federal loans.
No other bids were expected, but documents showed attempts at deals with dozens of companies, including Renault–Nissan, Toyota, Honda, Volkswagen and General Motors.
[20] In a setback to the arguments of hold-out creditors, primarily made up of investment firms, Judge Gonzalez on May 5, 2009 approved proposed bidding procedures that would likely lead to Chrysler's sale of assets to an entity in which Fiat is a major owner.
The lawyer for the dissident creditors holding US$300 million of a total US$6.9 billion of secured debt in Chrysler argued that proposed sale procedures preclude other potential bidders.
[23] On Sunday, May 31, 2009, bankruptcy Judge Arthur J. Gonzalez approved a proposed plan, rejecting more than 300 filed objections to the sale.
[7][8] According to the two-page decision and order, the Indiana funds "have not carried the burden" of demonstrating that the Supreme Court needed to intervene.
"[7] The proposed sale of assets is scheduled to close on Wednesday, June 10, 2009, when the money to finance the deal is wired by the government.