Chrysler-Fiat sale: Supreme Court delays final decision 'pending further order'

NEW YORK — Chrysler's five weeks of breakneck-speed bankruptcy proceedings came to a screeching — but possibly temporary — halt Monday, when a Supreme Court justice delayed its sale of assets to Italy's Fiat.

The move could derail the government's ambitious plan for the U.S. automaker to blaze a path to profitability without the burden of many of its debts.

Justice Ruth Bader Ginsburg issued a stay just a week before Chrysler says the government-backed sale must go through. After June 15, Fiat could walk away from the deal and leave the struggling U.S. automaker with little option but to liquidate.

It was unclear late Monday just how long the stay would last, or if the high court planned to take up the case.

Chrysler said it had no comment until it receives further information from the court.

Ginsburg said in her one-sentence order that the sale is "stayed pending further order," indicating that the delay may only be temporary. Ginsburg could decide on her own whether to end the delay, or she could ask the full court to decide.

A federal appeals court in New York approved the sale Friday but gave opponents until 4 p.m. Monday to try to get the high court to intervene. Ginsburg issued her order minutes before the deadline.

Despite the aggressive objections of a trio of Indiana state pension and construction funds that own a small part of Chrysler's secured debt, the automaker has moved swiftly through the Chapter 11 process.

The Auburn Hills, Mich., company received bankruptcy-court approval for the sale just a month after filing for bankruptcy protection and had been expected to emerge from court oversight when the sale closed.

Chrysler's ability to speed through the process has partially been a result of the involvement of the Obama administration's auto task force, which provided $4.5 billion in bankruptcy financing and helped negotiate a deal among the company's stakeholders.

Under a deal brokered in the days leading up to Chrysler's April 30 Chapter 11 filing, Fiat would receive up to a 35 percent stake in the new company created by the sale, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.

The United Auto Workers union would get a 55 percent stake that would be used to fund its retiree health-care obligations, while the U.S. and Canadian governments would receive a combined 10 percent stake.

Meanwhile, the automaker's secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debtholders balked at the deal, saying as secured lenders they deserved more.

A group of investment firms that held about 4 percent of Chrysler's secured debt filed an objection to the sale shortly after the automaker's Chapter 11 filing, but the group later dissolved, saying it didn't have enough members to mount an effective challenge.

Later on, the Indiana funds, represented by the same law firm as the dissident debtholders, filed their own objection and eventually appealed to the 2nd U.S. Circuit Court of Appeals and the Supreme Court. They claim the sale unfairly favors Chrysler's unsecured stakeholders, such as the union, ahead of secured debtholders like themselves.

The funds also are challenging the constitutionality of the Treasury Department's use of money from the Troubled Asset Relief Program to supply Chrysler's bankruptcy-protection financing. They say the government did so without congressional authority.

The funds hold about $42.5 million, or less than 1 percent, of Chrysler's $6.9 billion in secured debt. They bought it in July 2008 for 43 cents on the dollar.

Consumer groups and individuals with product-related lawsuits also are contesting a condition of the Chrysler sale that would release the company from product-liability claims related to vehicles it sold before the asset sale to Fiat.

Associated Press writers Mark Sherman and Ken Thomas in Washington, D.C., and Associated Press writer Tom Krisher in Detroit contributed to this report.