WASHINGTON – The U.S. Supreme Court on Monday delayed the Obama administration-brokered sale of Chrysler LLC, potentially throwing into jeopardy the bankruptcy proceedings of two of the three large American carmakers.
The high court agreed to a request for a delay from Indiana state pensioners and some public interest groups, who alleged the speedy process trampled long-established rights.
Justice Ruth Bader Ginsburg issued a brief ruling as a 4 p.m. EDT deadline for the deal to go through approached. She gave no indication of how long the case would be frozen or whether all the justices would hear the case. That means the ruling could be monumental, or that the court simply wants more time to review the case.
Blocking the sale could force Chrysler into liquidation, according to a written argument by Solicitor General Elena Kagan of the Justice Department, the administration’s lawyer before the high court.
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Italian carmaker Fiat was to enter into an alliance with Chrysler, taking a 35 percent stake that later could be converted to majority ownership. Under terms of the deal, however, Fiat can walk away if regulators and courts don’t approve the deal by June 15.
The blockage of Chrysler’s sale also could affect General Motors Corp., which is following a similar quick-sale strategy in its bankruptcy proceeding.
“I’m delighted that it appears we’ll be getting our day in court,” Richard Mourdock, Indiana’s state treasurer, said on CNBC television minutes after learning of the delay.
Representing bondholders who collectively hold less than 1 percent of Chrysler’s debt, Mourdock argued that the Obama administration tossed “out the window” more than 150 years of bankruptcy court precedent in its rush to preserves jobs. He also argued that the use of bank bailout money to keep Chrysler afloat was illegal.