Bankruptcy judge OKs Chrysler dealer cuts
The troubled automaker will terminate nearly 800 dealer franchises as it struggles to emerge from bankruptcy.
NEW YORK (CNN) -- A federal bankruptcy judge Tuesday approved automaker Chrysler LLC's plan to terminate 789 dealer franchises, calling it an "appropriate and necessary" step by the company.
Effective immediately, the dealers are no longer authorized Chrysler, Dodge and Jeep dealers, Judge Arthur Gonzalez said in his order issued Tuesday afternoon. The decision to cut the dealerships "constitutes an exercise of sound business judgment" by Chrysler, which filed for bankruptcy protection in April, Gonzalez wrote.
The dealerships Chrysler wants to close represent about 25% of its showrooms, but only 14% of its total sales, the automaker disclosed in court papers.
"We are pleased with the Judge's decision allowing us to go forward with the realignment of our dealer network," said Jim Press, Chrysler's vice chairman and president, in a statement.
Press said deciding which dealers would be spared was "gut wrenching," but said it was "an absolutely essential part of our effort to assure the long-term viability of the new Chrysler Group."
The company said it expects to save about $1.4 billion over 4 years as a result of closing the dealerships. Chrysler also said the dealerships that will remain in business are "poised and ready" to take care of sales, warranty, service and parts requirements for existing customers.
The ruling comes as Chrysler awaits a key decision on its fate from the U.S. Supreme Court, has put a hold on the company's sale to Italian automaker Fiat.
The Obama administration has pumped more than $7.2 billion into Chrysler to keep it afloat while it engineers a deal to keep the tottering automaker from being forced into liquidation. Government lawyers warned the Supreme Court on Tuesday that Fiat could abandon the deal unless it is sealed by June 15.
"While Chrysler remains in bankruptcy with no confirmed alternative to liquidation, its situation deteriorates," the government argued.
Fiat officials, after the Supreme Court's ruling Monday, told wire services the company would not walk away from the deal if Chrysler could no longer meet the June 15 deadline. They did not set a new deadline.
Supreme Court Justice Ruth Bader Ginsburg granted the stay to opponents of the sale who say they stand to suffer major investment losses if the transaction with Fiat is approved. Attorneys for the Indiana state pension funds that are seeking to block the company's emergence from bankruptcy argue that there is no need to rush the sale of Chrysler assets to Fiat. 
