Investors seek to block Chrysler sale

A group of investment funds sought yesterday to block Chrysler's planned alliance with Fiat, while the Italian carmaker advanced its bid to overhaul the industry by setting its sights on Germany's Opel.

The dissenting lenders led by Oppenheimer Funds and Stairway Capital argued in a New York bankruptcy court that the sale proposal was "orchestrated entirely by the US Treasury and foisted upon the debtors".

A lawyer for the group, Tom Lauria, said some identified publicly in the politically charged reorganisation have received death threats "which they perceive as being bona fide". Those lenders have notified police and the FBI, he said.

President Barack Obama called the dissenters "speculators" in public criticism last week for refusing to join Chrysler's biggest banks in a government-brokered deal to wipe out Chrysler's US$6.9 billion ($12 billion) debt and move forward with the Fiat alliance.

"We still have a very fragile coalition to get from here to there," Corinne Ball, Chrysler's bankruptcy lawyer, said near the start of a court hearing yesterday.

Chrysler asked US Judge Arthur Gonzalez to schedule a hearing as soon as May 21 to approve a US$2 billion sale of most of the carmaker's assets.

"Absent a prompt sale, approved in the coming weeks, the value of the debtors' assets will rapidly decline and the ability to achieve a going concern sale will be lost," Chrysler said in court documents supporting the sale to Fiat.

Gonzalez adjourned a hearing on Chrysler's request until today.

JPMorgan Chase lawyer Peter Pantaleo, of Simpson Thacher & Bartlett, told the court that Chrysler had more than the required backing from the secured lenders to support the proposed sale.

JP Morgan led a group of banks that control about 70 per cent of Chrysler's debt. They have agreed to a deal that would pay lenders US$2 billion.

Chrysler's bankruptcy, one of the biggest US public company bankruptcies ever, is widely seen as almost a dry run for a potential reorganisation of General Motors.

GM, which like Chrysler is surviving on government bailout money, faces its own restructuring deadlines on June 1 and is trying to reorganise its business in the US and overseas. This includes the potential sale of its German-based Opel unit, possibly to Fiat.

Fiat chief executive Sergio Marchionne said on Monday his company could seek a merger with Opel, then spin off and list the combined entity.

Combining with Chrysler as well as Opel, which makes up 80 per cent of GM Europe's annual sales of US$34.4 billion, fits Marchionne's strategy of bulking up Fiat to survive the crisis engulfing the car industry.

"Industrial logic-wise, Opel makes a lot more sense than Chrysler. The big hurdle we can see is social cost," Nomura International analyst Michael Tyndall said.

"It's all very well to say they compete broadly in the same markets with similar platforms and there may be economies of scale. But the broad translation of economies of scale is fewer jobs and I'm not sure if the Italian or German Governments have the appetite for the job losses a merger would entail."

The biggest opposition to a deal is likely to come from German and Italian unions.

Opel employs around 25,000 people at its factories in Germany.

As well as Fiat, Austrian-Canadian car parts maker Magna International has expressed an interest in Opel.

Magna declined to comment. Reuters