Chrysler bankruptcy expected to last 30-60 days

Jesse Snyder, Automotive News

New York -- Chrysler LLC filed for Chapter 11 bankruptcy protection yesterday in New York and expects to emerge within 60 days in an alliance with Fiat S.p.A., senior White House officials said.

In a conference call briefing, officials said they expect a "very short" 30- to 60-day bankruptcy process after filing a Section 363 petition seeking to separate the company into two parts. That will allow Chrysler to continue operating while resolving debt issues and reducing its number of dealers.

The officials do not expect a significant disruption to normal operations and said suppliers will continue to be paid "in the normal course of business."

Fiat and federal officials will select the board of the Chrysler that emerges under Fiat control.

A speedy filing is essential to avoid giving dissenting shareholders an opportunity to file a petition to dissolve Chrysler first. "It's important that this be filed as a voluntary bankruptcy," said one official.

But experienced bankruptcy lawyers warn that even streamlined bankruptcy filings take longer than expected.

"Once a bankruptcy is filed, it is out of the administration's hands and a bankruptcy judge has complete control," said Douglas Bernstein, a partner at Plunkett Cooney in suburban Detroit. "Bankruptcy judges have a responsibility to make sure everybody gets a hearing."

Added partner Michael Fleming: "Bankruptcy judges are extremely independent. They are appointed for 14-year terms."

President Obama personally made the decision to file bankruptcy, the officials said. Fiat deferred to the U.S. government, saying it had much less experience with U.S. law.

From Automotive News (A Crain publication)