Chrysler sale on hold, but for how long?

updated 8:02 p.m. ET June 8, 2009

NEW YORK - Chrysler’s five weeks of breakneck-speed bankruptcy proceedings came to a screeching — but possibly temporary — halt Monday, when a Supreme Court justice delayed its sale of assets to Italy’s Fiat.

The move could derail the government’s ambitious plan for the U.S. automaker to blaze a path to profitability without the burden of many of its debts.

Justice Ruth Bader Ginsburg issued a stay just a week before Chrysler says the government-backed sale must go through. After June 15, Fiat could walk away from the deal and leave the struggling U.S. automaker with little option but to liquidate.

It was unclear late Monday just how long the stay would last, or if the high court planned to take up the case.

Chrysler said it had no comment until it receives further information from the court.

Video   The challenger June 8: Indiana State Treasurer Richard Mourdock discuses news that the Supreme Court has granted a delay in the sale of Chrysler to Fiat. CNBC

Ginsburg said in her one-sentence order that the sale is “stayed pending further order,” indicating that the delay may only be temporary. Ginsburg could decide on her own whether to end the delay, or she could ask the full court to decide.

A federal appeals court in New York approved the sale Friday, but gave opponents until 4 p.m. Monday to try to get the high court to intervene. Ginsburg issued her order minutes before the deadline.

Despite the aggressive objections of a trio of Indiana state pension and construction funds that own a small part of Chrysler’s secured debt, the automaker has moved swiftly through the Chapter 11 process.

The Auburn Hills, Mich., company received bankruptcy court approval for the sale just a month after filing for bankruptcy protection and had been expected to emerge from court oversight when the sale closed.

Chrysler’s ability to speed through the process has partially been a result of the involvement of the Obama administration’s auto task force, which provided $4.5 billion in bankruptcy financing and helped negotiate a deal between the company’s stakeholders.

Under a deal brokered in the days leading up to Chrysler’s April 30 Chapter 11 filing, Fiat will receive up to a 35 percent stake in the new company created by the sale, in exchange for sharing the technology Chrysler needs to create smaller, more fuel-efficient vehicles.

The United Auto Workers union will get a 55 percent stake that will be used to fund its retiree health care obligations, while the U.S. and Canadian governments will receive a combined 10 percent stake.

Meanwhile, the automaker’s secured debtholders would get $2 billion in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt. Some of the debtholders balked at the deal, saying as secured lenders they deserved more.

A group of investment firms that held about 4 percent of Chrysler’s secured debt filed an objection to the sale shortly after the automaker’s Chapter 11 filing, but the group later dissolved, saying it didn’t have enough members to mount an effective challenge.

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