Chrysler balks at Indiana treasurer's objections to its bankruptcy

Scott Olson, The IBJ

solson@ibj.com

Chrysler LLC fired back at Indiana Treasurer Richard Mourdock yesterday, saying his objection to the way the Michigan-based auto maker's Chapter 11 bankruptcy proceeding is being handled could lead to its liquidation.

Mourdock, who oversees pension funds for state teachers, police officers and construction workers, said in a May 20 statement that Chrysler's plan to emerge from bankruptcy would "rip off" retirees.

Chrysler plans to sell the vast majority of its assets to a group led by Italy's Fiat Group SpA and form a new company, leaving behind many of the liabilities and costs that had sent it into bankruptcy protection. A sale hearing is scheduled for tomorrow, and the deal is expected to close about 30 days later.

The Indiana State Teachers Retirement Fund and Indiana State Police Pension Trust, along with the Indiana Major Moves Construction Fund, filed an objection to the proposed sale. They charge that the deal gives preferential treatment to other stakeholders in the case and ignores the needs of Chrysler's secured lenders.

The objection asks that an examiner be appointed to look at Chrysler's business decisions and that the company be put in the hands of a trustee who can act independently of the government.

Attorneys for the funds will present their objections today in court.

In a statement issued yesterday, Chrysler said it believes Mourdock's request would lead to the company's liquidation and the loss of more than 4,000 jobs in Indiana.

"The Treasurer's actions lead one to wonder if his motives are financial or political," Chrysler said in the statement.

Chrysler estimated that Indiana's loss would be about $2 million under the current terms, which 98 percent of creditors have accepted, the company said.

Mourdock said the Obama administration has changed long-standing investment rules in the bankruptcy proceedings, causing the police pension fund to lose $147,400 and the road construction fund managed by Mourdock's office to lose $896,000. The teachers fund has pegged its losses at about $4.6 million.

"As fiduciaries, we can't allow our retired police officers and teachers to be ripped off by the federal government," Mourdock said in the statement. "The Indiana state funds suffered losses when the Obama administration overturned more than 100 years of established law by redefining 'secured creditors' to mean something less."

A bankruptcy judge on May 20 denied a motion from the Indiana funds to delay the proposed sale of Chrysler's assets, saying the funds' plan to challenge the legality of the sale in another court wasn't enough of a reason to delay the proceedings.