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On Tuesday, almost 800 Chrysler, Dodge, and Jeep dealers will go out of business across the country. About a month ago, Chrysler asked a bankruptcy court its permission to end franchise agreements for what amounts to 25% of its dealerships. The reason Chrysler is doing this is to cut costs; if its trying to cut costs closing these dealerships may be the way to go just because Chrysler can’t keep up inventory levels for the amount of dealerships it currently has.

Now another problem has arisen amongst Chrysler’s attempt to come out of bankruptcy.

Three of Indiana state pension and construction funds wants the United States Supreme court to stop the sale of Chrysler to Fiat because they believe that they are getting a bad deal in the sale. Yesterday, there was an emergency filing at the Supreme Court by consumer advocacy lawyers.

The sale of the majority of Chrysler LLC’s assets to Fiat Group SpA in Italy was approved Friday in New York, but there was a contingency that would allow anyone who had any complaints until Monday to air their grievances.

The group who initially wanted to file the complaint with the Supreme Court says that the deal between Chrysler and Fiat “unfairly favors the interests of Chrysler’s unsecured stakeholders ahead of those secured debt holders.” The secured debt holders include the funds filing. The funds’ lawyers also claimed that the Treasury Department acted unconstitutionally by using money from the TARP funds to provide money to Chrysler due to bankruptcy. It is claimed that the government intervened without permission from Congress.

In this case, Chrysler is in a lot of trouble and getting out of bankruptcy is best for ALL stake holders of the company and not just the unsecured or the secured debt holders. If I were a stake holder in Chrysler, I would rather the company try to make a speedy recovery from bankruptcy than to have to wait and watch my fund drop more and more because the company is in a prolonged bankruptcy. Arthur Gonzales, the judge overseeing Chrysler’s case, was the judge that approved the sale to Fiat last weekend and he even said that the deal was the ONLY alternative to liquidation.

If Chrysler liquidates, how much will your securities be worth then?

Jeremy

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