Chrysler filed for bankruptcy on Thursday in New York and disclosed a reorganization plan that will put Chrysler's core assets into a new company owned by its workers, Italian car maker Fiat SpA and the U.S. and Canadian governments.
That plan has run into strong opposition from some of the automakers' lenders, who said late on Thursday that they expect to object to the transaction.
Corinne Ball, a lawyer for Jones Day who represents Chrysler, said during the company's first court hearing that the automaker had idled its plants.
Chrysler said on Thursday it planned to do so and that it would keep them closed for the 30 to 60 days it has planned for its restructuring.
Chrysler is aware that experts believe that a car company cannot survive bankruptcy, but Chrysler can, and must, Ball said.
“We need to keep driving forward. We need to protect our core value and we need to keep safe our customers,” Ball said. Without the deal, the shutdown threatens the company's workers, suppliers and dealers, she said.
“We idled all our plants -- our workers, network, supply chain -- they're all waiting on us to start up again,” she said.
The company has 38,500 hourly and salaried workers, 23 manufacturing plants and facilities, and 3,200 dealers employing 140,000 people in the United States, it said in court documents.
It also said in court documents that it has more than $5.7 billion in outstanding auto parts and service supplier invoices.
While some lenders have withheld support for the plan, other parties like the dealers are on board.
“The dealers are fully supportive of efforts to create a strong and competitive Chrysler -- indeed their livelihoods depend on it,” Michael Bernstein, an attorney at Arnold & Porter LLC, representing Chrysler dealerships, said during the hearing.
Before the hearing wrapped up, the judge approved Chrysler's request to continue to pay employee wages, salaries and incentives.
The judge also granted the company's request to make good on customer and dealer obligations, including interim approval for warranties and extended service.
Other motions, such as interim approval of the company's $ 3.3 billion debtor-in-possession financing from the government, will be addressed at a hearing on Monday morning.
Chrysler LLC heads to U.S. bankruptcy court Friday morning to obtain permission to continue paying employees and meeting customer and dealer obligations against a backdrop of mounting opposition from certain of its lenders.
A group of about 20 lenders that balked at the terms of the government-brokered deal said late Thursday it plans to object to the company's reorganization plan, which will put Chrysler's core assets into a new company owned by its workers, Italian car maker Fiat SpA and the U.S. and Canadian governments.
Chrysler filed for bankruptcy on Thursday in New York and disclosed the plan. The plan, however, requires approval by the U.S. Bankruptcy Court.
The company has been pushing for a prompt hearing, saying in court documents that the proposed transaction is the only means to avoid liquidation of the 83-year-old car maker.
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