NEW YORK — The Supreme Court on Tuesday cleared the way for Chrysler's partnership with Italy's Fiat, rejecting an appeal by a trio of Indiana pension and construction funds, consumer groups and others to block the automaker's sale.
The sale of Chrysler LLC's assets to Fiat Group SpA had been expected to close more than a week ago, but Supreme Court Justice Ruth Bader Ginsburg's decision on Monday to delay the sale while studying an appeal by the Indiana state funds threatened to derail Chrysler's restructuring plans.
A federal appeals court in New York had earlier approved the sale but gave opponents until Monday afternoon to try to get the Supreme Court to intervene. The Indiana funds, which hold less than 1 percent of Chrysler's secured debt, claim the sale unfairly favors Chrysler's unsecured stakeholders such as the union ahead of secured debtholders like themselves.
Justice Ginsburg ordered a temporary delay just before a 4 p.m. EDT deadline on Monday. Chrysler, Fiat and the Obama administration warned that the high court's intervention could scuttle the sale, which faced a deadline next Monday, after which Fiat could exit the arrangement.
Early Tuesday, the pension plans seized on comments from Fiat officials that they would not walk away from the deal even if Monday were to pass without completing the sale. The plans tried to persuade the justices that there was no reason to rush to meet that deadline. But Chrysler, Fiat and the Obama administration stressed in response that Chrysler was losing $100 million every day its plants remain closed and that the deal would automatically terminate in less than a week, with no guarantee that a new agreement would be reached.
If the closing is delayed by more than 10 days, the government will need to "either to increase its overall funding to the detriment of taxpayers, or abandon its role in the transaction," the administration said.
Late Tuesday, the Supreme Court turned down the opponents' last-ditch bid. The court issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong.
"The applicants have not carried that burden," the court said.
The court did not consider the merits of the opponents' arguments, only whether to hear their full-blown appeal.
Indiana Treasurer Richard Mourdock expressed disappointment with the decision and said options seem limited for opponents of the sale.
"Obviously the Supreme Court of the land is the supreme court of the land," Mourdock said. "The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors."
The White House issued a statement applauding the decision: "The Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker."
Also Tuesday, a bankruptcy judge approved Chrysler's plan to terminate 789 of its dealer franchises.
U.S. Judge Arthur Gonzalez's order says the franchises, which represent about 25 percent of the company's dealer base, can no longer act as authorized Chrysler, Dodge and Jeep dealers, effective immediately. A written ruling explaining the decision was expected to be filed later.
Earlier in the day, more than 25 attorneys representing hundreds of dealers from across the country argued in court that little would be gained by terminating the franchises, while Chrysler maintained that the move is a necessary part of its plan to cut costs and quickly emerge from bankruptcy protection.
Many of the dealers were trying to sell the last cars on their lots and preparing to shut their doors for good at the end of the day, while others planned to sell used cars or other brands after severing ties with Chrysler.
At Tuesday's hearing, Chrysler attorneys also said the automaker would extend until Monday its program to help the affected dealers send any unsold vehicles to other dealers.
Auburn Hills, Michigan-based Chrysler has passed swiftly through about five weeks of bankruptcy proceedings and now appears to be able complete the sale of its assets to Fiat by Monday and emerge from bankruptcy protection shortly thereafter. Chrysler's ability to speed through the bankruptcy process has partially been a result of the involvement of the Obama administration's auto task force, which provided $4.5 billion in financing and helped negotiate a deal with the company's stakeholders.
Under the agreement brokered in the days leading up to Chrysler's April 30 bankruptcy protection filing, Fiat will receive up to a 35 percent stake in the automaker, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.
The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will 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. The Indiana funds involved in the Supreme Court appeal hold about $42.5 million, or less than 1 percent, of Chrysler's $6.9 billion in secured debt. They bought it in 2008 for 43 cents on the dollar.
The funds have also challenged 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.
Consumer groups and individuals with product-related lawsuits also contested 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. Compensation for such claims would have to come from the parts of the company not being sold to Fiat. But those assets have limited value and it's unlikely there will be anything to pay out.
Congress continues to scrutinize the Obama administration's restructuring of Chrysler and GM. The Senate Banking Committee said it planned to call Ron Bloom, a senior adviser to the auto task force, and Edward Montgomery, who serves as the Obama administration's director of recovery for auto communities and workers, to a hearing Wednesday.
Associated Press writers Mark Sherman and Ken Thomas in Washington, Colleen Barry in Milan and Tom Krisher in Detroit contributed to this report.