Ex Chrysler Executive Says Fiat Was Only Option

NEW YORK, May 27, 2009; Tom Hals and Emily Chasan writing for Reuters reported that Chrysler's former president and vice chairman Tom LaSorda said on Wednesday Fiat was the U.S. automaker's only shot at survival as no other carmaker would have been willing to give the company "a nickel."

At a court hearing in U.S. bankruptcy court in Manhattan, former Chrysler executive Tom LaSorda said he never considered breaking up the automaker last year, although a financial analysis showed it could have fetched as much as $25 billion.

A lawyer for Indiana's pension funds, which oppose the sale of most of Chrysler's operations to a group, including the U.S. government and Italian carmaker Fiat SpA, questioned LaSorda about steps he could have taken that would have recovered more for Chrysler's lenders than the $2 billion they are expected to get in bankruptcy.

Lasorda, who retired when Chrysler declared bankruptcy at the end of last month, provided details on talks with Nissan and General Motors Corp about a product alliance. He said neither offered cash and talks never progressed as far as the talks with Fiat.

Fiat will contribute technology and access to foreign markets, but not cash, to the proposed deal for Chrysler's assets. The court is considering whether to approve that sale, which plans to sell Chrysler's assets to a "New Chrysler" owned by the company's union, the U.S. and Canadian government and Fiat.

A Fiat executive said in court on Wednesday the Italian carmaker was in the deal for "the long haul" and did not expect to see equity returns in the first few years.

NO OFFERS

LaSorda said that, while an analysis last year showed the company's assets might have been worth between $9.1 billion and $25 billion, no party made such an offer.

"I didn't support a Chrysler breakup," he told the court.

He said it would not have been possible to separate brands manufactured in the same factory and that depend on the same suppliers.

"The enterprise wouldn't have survived," he added.

The lawyer questioned him on whether he pursued steps that favored junior creditors such as union workers over secured lenders, which are given priority repayment in bankruptcy.

"I had to look at all stakeholders," he said.

The attorneys for the pension funds have argued a union- aligned trust is being treated more favorably in the bankruptcy than secured lenders, in violation of bankruptcy law.

Editing for Reuters by Andre Grenon