NEW YORK — A federal bankruptcy judge has approved the sale of most of Chrysler's assets to Italy's Fiat, moving the American automaker a step closer to its goal of a quick exit from court protection.
But a trio of Indiana state pension and construction funds filed an appeal, saying that the ruling sets aside the rights of the company's secured lenders while doling out the company's assets to others.
Judge Arthur Gonzalez said in his ruling late Sunday that a speedy sale — the centerpiece of a restructuring plan backed by President Barack Obama's automotive task force — was needed to keep the value of Chrysler from deteriorating and would provide a better return for the company's stakeholders than if it had chosen to liquidate.
"Any material delay would result in substantial costs in several areas, including the amounts required to restart the operations, loss of skilled workers, loss of suppliers and dealers who could be forced to go out of business in the interim, and the erosion of consumer confidence," Gonzalez wrote.
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As a result, the proposed sale must be approved to preserve the value of Chrysler's business and what is ultimately left for its stakeholders, Gonzalez said.
"With this approval, the new Chrysler Group is created and can prepare to launch as a vibrant new company formed with Fiat," Robert Nardelli, Chrysler's outgoing chairman and chief executive, said in a statement.
Nardelli is scheduled to leave Chrysler once the sale is final.
Gonzalez's ruling came after three marathon days of testimony last week, during which everyone from Nardelli to dealers scheduled to lose their franchises took the stand.
Chrysler has maintained that selling the bulk of its assets to Fiat is the only way it can avoid selling itself off piece by piece. In exchange for a stake in the new Chrysler, Fiat has agreed to share with it the technology it needs to create the smaller, more fuel-efficient vehicles now craved by U.S. drivers.
With the approval of the sale, Chrysler could emerge from Chapter 11 bankruptcy protection as soon as this week, defying observers who said that the company could linger under court oversight for years.
The Indiana funds, which own $42.5 million of Chrysler's $6.9 billion in secured debt, aggressively objected to the sale, saying that it does not provide a big enough return for secured debt holders, while paying off unsecured stakeholders.
Indiana State Treasurer Richard Mourdock said later Monday that he was "disappointed but not surprised" by Gonzalez's ruling. He said the state's attorneys will appeal the case to U.S. District Court.
"The court is determined to rewrite 150 years of law defining 'secured creditor,'" he said in a statement. "It saddens me to see government conducted in this manner."
It's unclear how much their appeal could delay the sale's closing. Chrysler filed a motion on Monday asking that the sale be certified for immediate appeal to move the case quickly to U.S. District Court.
Chrysler has said that any delay could cause the deal with Fiat to crumble. The Italian automaker has the option of pulling out if the sale does not close by June 15.
As part of Chrysler's restructuring plan, a UAW retiree health care trust will receive a 55 percent stake in the new company, while Fiat will get a 20 percent stake that can increase to 35 percent. The remaining 10 percent of the company will be owned by the U.S. and Canadian governments.
Besides the Indiana funds, a group of more than 300 Chrysler dealers scheduled to lose their franchises under the restructuring also objected to the sale. A separate hearing to address Chrysler's motion to terminate 789 franchises is scheduled for Wednesday.