By Michael O'Brien - 06/09/09 03:59 PM EDT
The Obama administration as well as automakers Fiat and Chrysler said Tuesday that there is a substantial possibility Fiat would back out of a government-financed deal to acquire Chrysler if the Supreme Court delays approving a final deal past June 15.
Solicitor General Elena Kagan said that the lawyers for the Indiana pensioners' brief encouraging the court to take its time in considering a Fiat-Chrysler deal "would result in irreparable harm to the Debtors and the public interest," while the car companies said it could result in a liquidation of Chrysler.
Kagan, filing on behalf of the U.S. government, disputed that notion on Tuesday afternoon.
"Applicants’ prediction is not well founded: if the sale is not consummated by June 15, there is a substantial possibility that Fiat will abandon the transaction or insist on materially different terms as a condition of its participation," Kagan said in the government's brief. "And even if Fiat were ultimately willing to consummate the sale on the existing terms after June 15, the delay occasioned by a stay would result in irreparable harm to the Debtors and the public interest."
Lawyers for Fiat also acknowledged that they may be inclined to back out of a deal if the court had not approved it by next Monday.
"If the sale transaction is not completed soon, there can be no assurance that a replacement transaction could be structured and agreed [upon] that would preserve any aspect of Chrysler as a going concern," lawyers for Fiat wrote, disputing the Indiana pensioners' argument.
Chrysler said that each day the sale has not been approved costs the company (and by extension, the government) $100 million.
"There is a looming threat of drastic and irreparable harm to Chrysler, all of its constituencies -- including the lenders under its senior secured financing facility -- and the public interest if the Fiat sale is not closed by June 15, 2009," Chrysler's attorney said in its brief. "And every day that passes between now and then only contributes substantially to this harm."
The government said that Chrysler would have to be liquidated if the June 15 deadline passes without a final deal.
"At that time, based on the then-existing facts and circumstances, Chrysler could be forced to liquidate even if Fiat remains willing to participate in the transaction," Kagan warned.