Fiat stated after this decision they would NOT back down from this deal. They are committed to the Chrysler buyout. Chrysler itself is worried, stating that a pause like this could “kill” the deal and cause the auto maker to force a liquidation. Chrysler is trying to save their other makes, Dodge/Jeep, as well as almost 39,000 jobs.

Supreme Court officials said this stay was only to further review the merits of a sale to Fiat. Also causing some tension is the Indiana shareholders who hold pension funds worth $42.5 million of $6.9 billion in Chrysler secured loans. They are concerned those pensions will be lost if this merger goes through.

NEW YORK — A federal bankruptcy judge approved the sale of most of Chrysler LLC’s assets to Italy’s Fiat, moving the American automaker a step closer to its goal of a quick exit from court protection.

“With this approval, the new Chrysler Group is created and can prepare to launch as a vibrant new company formed with Fiat,” Robert Nardelli, Chrysler’s outgoing chairman and chief executive, said in a statement. Nardelli is slated to leave Chrysler once the sale is final.

How effective can this move be? So far the outcome is unclear, personally we don’t see too many of these dealers taking on the big dog and winning. As the dealerships are ordered to stop selling cars on June 9th, the pissed off dealerships are using the argument that laying them off with only three weeks notice is unethical.

Again, this will not be an easy sell – according to the Wall St. Journal: “Bankruptcy laws give the courts wide latitude for tearing up existing contracts like dealer licenses. A group of Chrysler creditors also formed a committee to fight a plan to slash its secured debt, but almost all have now relented and the committee has been disbanded.”

According to Automotive News, “Just days after agreeing to take a 20 percent stake in Chrysler, Fiat is expected to announce plans to purchase GM Europe’s core brands of Opel, Vauxhall, and Saab.”

Apparently Fiat has had the hots for Opel these past couple of decades. However, this is the first time the Italian auto maker has made moves towards purchasing a percentage of the O-P. This Superpower of Automotive Worldwide might would consist of Fiat, Lancia, Alfa Romeo, Chrysler, Saab, Opel and Vauxhall. It would be the second largest automaker, selling 6 to7 million vehicles a year and posting annual revenues of $106 billion dollars. Let’s see President Obama stop this one!

The Dodge "Storm Trooper" Avenger

In an interview with Financial Times, Fiat’s Sergio Marchionne said “From an engineering and industrial point of view, this is a marriage made in heaven.” He went on to say that Fiat and Opel could save nearly a billion euros a year by sharing platforms and technology. We’ll stay on top of this one, and continue to praise Fiat and all the good work they are doing, as we await their rise to be our new overlords.

Fiat has decided that picking up a stake in Chrysler on the cheap is a ripe opportunity. And how cheap is that? Real cheap, as in, they don’t have to shell out a dime. Fiat will provide Chrysler with models and the platforms and technology to build them, as well as management services and business cooperation in exchange for what will initially be a 35 percent stake in the company, which may be taken past 50 percent to full ownership at a later date.

Will Fiat be able to exploit Chrysler as a low-cost manufacturing base in the US? Will they revive the Chrysler and Dodge brands and put successful models into dealerships that people will want to buy, despite the stigma of bankruptcy? That’s the multi-billion dollar question.

Chrysler, and the Obama administration which has pushed the company towards a bankruptcy declaration and hopes to usher the automaker through a streamlined Chapter 11 proceeding, says it hopes to emerge from bankruptcy with the proper restructuring done within weeks. If they can pull it off maybe, just maybe, they have a chance at surviving and one day prospering again.

UPDATES: 1) Chrysler LLC will idle most of its plants during its time in bankruptcy. The shutdown begins Monday and will stretch through the 30 to 60 days it is expected to take to restructure in Chapter 11 bankruptcy, the company said in a statement today. Chrysler has 12 assembly plants, including eight in the United States. It also owns and operates five North American engine plants, six stamping plants and seven transmission and parts plants. Chrysler has 26,000 UAW workers and 10,000 represented by the Canadian Auto Workers. Chrysler spokesman David Elshoff confirmed the plan. He said he would provide details as soon as he could today. The plant shutdown will further strain a supply base stressed by a 50 percent vehicle production cut in North America since the start of the year.

From Automovite News: WASHINGTON (Reuters) — Chrysler LLC will proceed with Chapter 11 bankruptcy protection now that talks with debt holders have broken down, an administration official said today. Chrysler also appears close to wrapping up its partnership agreement with Italian automaker Fiat S.p.A. by a U.S.-ordered midnight deadline.

An administration official with knowledge of the talks said the holdout creditors were provided a final opportunity to approve an increased offer of $2.25 billion in cash, up from $2 billion, in exchange for writing off all of Chrysler’s $6.9 billion in secured debt. They were given a deadline of 6 p.m. Wednesday.

President Barack Obama plans to announce tomorrow that Chrysler LLC will be placed into Chapter 11 bankruptcy, leading to an alliance with Italian automaker Fiat SpA, people involved in the matter said.

Administration officials are still resolving outstanding issues, and the plan is not finished yet, said one of the people, who declined to be named. Any bankruptcy filing could come as soon as tomorrow, people familiar with the matter said.

Chrysler’s best assets would be sold to a new entity that would have an ownership structure similar to that envisioned in an out-of-court deal between the Auburn Hills, Michigan-base automaker and Turin, Italy-based Fiat, the people said.

The Italian company would become a 20 percent owner of Chrysler, and a union retiree health-care trust fund would own 55 percent, with the rest of the company staying in the government’s hands initially, people familiar with the matter said.

Chrysler has made progress in out-of-court restructuring, including reaching labor deals with the United Auto Workers union and Canadian Auto Workers on new contracts. Chrysler Chief Executive Officer Bob Nardelli said today in a memo to employees that the company is waiting to hear whether its 46 lenders will agree to take $2 billion in cash to wipe out $6.9 billion in secured debt.

From WSJ.com:
NEW YORK — Chrysler LLC doesn’t see “any reason” the company’s proposed partnership with Italy’s Fiat SpA will not happen, Vice Chairman Jim Press said on Wednesday.

In an interview at the New York auto show, Mr. Press added that Chrysler is making progress daily on finalizing a deal with Fiat, and said the two companies are a good fit for each other.

“Imagine the scope of our product line,” Mr. Press said, referring to Fiat’s line of small cars and Chrysler’s larger vehicles. “We’re going to from viable to formidable,” he said.

The federal government has given Chrysler until May 1 to sign a binding agreement with Fiat. Despite Chrysler’s financial difficulties, Mr. Press said, “We don’t see any reason why it’s not going to happen.”

The Obama administration determined last month that Chrysler is not viable as a stand-alone entity. The administration, along with the Treasury Department, did not rule out the possibility of a “surgical” bankruptcy aimed at restructuring the company.

At the New York show, Mr. Press showcased a mini Fiat 500 car at the unveiling of the 2011 Jeep Grand Cherokee. He said displaying the iconic vehicles alongside each other was a sign of how close the two companies are to closing in on a deal.

“It shows our confidence,” he said. “It shows how strong the alliance with Fiat could be.”

Mr. Press added that Chrysler Financial could receive more federal funding soon. Chrysler Financial, which operates as an independent company and is not controlled by Chrysler, was given a $1.5 billion federal loan to help it provide loans to auto buyers. That money is expected to run out sometime this month, according to people familiar with the matter.

Last month, Chrysler Financial confirmed it had requested more aid, but declined to specify the amount.