Chrysler Running Short Of Cash, Options As Sale Delayed

Chrysler LLC is poised to run out of money by July 4 if it fails to complete the sale of its assets to Italian auto maker Fiat SpA (FIATY), a deal that has been delayed owing to opposition from lenders.

A budget, filed with a New York bankruptcy court in early May, shows the auto maker burning through its $4.1 billion in debtor-in-possession financing and $400 million in cash collateral by the end of the week of June 29 as it pays employees and suppliers, and maintains its plants.

The budget for Chrysler, which filed for Chapter 11 protection on April 30, took into account that most of the auto maker's production plants would be idled during the bankruptcy process and the salaried work force would take up to two weeks of unpaid vacation.

If the sale doesn't happen by early July, Chrysler would likely be forced to make even deeper cuts and turn to the Obama administration for more help, even as the government has said it won't provide further assistance. Without additional aid, Chrysler would face liquidation, and the economy would be saddled with tens of thousands of job losses.

The fate of Chrysler was thrown into limbo Monday when the U.S. Supreme Court delayed the sale of the U.S. auto maker's assets to Fiat at the request of several Indiana pension funds and consumer groups that oppose the transaction. Should the high court maintain the stay it issued on Monday, the sale process could be delayed for weeks.

Chrysler declined to comment Tuesday on what its options might be if the sale is delayed. In a filing at the Supreme Court Tuesday, the company said "every day past June 15 increases the risk that Chrysler's business will not be able to restart successfully."

Fiat has the option of walking away from the deal on June 15. Following the news from the Supreme Court, Fiat Chief Executive Sergio Marchionne said his company wouldn't walk away from its deal to buy Chrysler even if the June 15 deadline is missed.

However, in a filing of its own Tuesday at the Supreme Court, Fiat said if the sale isn't completed soon, "there can be no assurance that a replacement transaction could be structured and agreed that would preserve any aspect of Chrysler as a going concern."

Fiat has no plans to infuse Chrysler with cash during the bankruptcy process, and the Obama administration said at the time of the Chapter 11 filing that it wouldn't provide more funding as Chrysler wasn't viable without a partner.

A White House official on Monday downplayed the significance of the latest development, calling it "an administrative extension designed to allow sufficient time for the Court to make a determination on the merits of the request for a stay."

Some experts think the government, which has staked its credibility on getting Chrysler and General Motors Corp. (GMGMQ) quickly through bankruptcy, would have no choice but to provide additional assistance.

"I think the government will give them another $1 billion to keep them going, but keep them on a short leash," said Richard Tilton, a bankruptcy attorney who participated in Chrysler's 1970's restructuring. "What alternative do they have?"

More aid for Chrysler would touch off a firestorm from lawmakers and the public, as well as cast more doubt on the Obama administration's ability to steer GM through a similar "quick" bankruptcy process. GM filed for bankruptcy on June 1.

The government has already injected almost $9 billion in emergency funding into Chrysler since late last year, and more than $20 billion into GM.