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Court clears some of Chrysler rescue hurdles

Editorial Staff

A US insolvency judge has approved Chrysler signing the death warrant of 789 dealerships in the effort to save the company, or at least part of it. And another court approves the disposal of of some of it to Fiat.

The US Supreme Court overturned a stay granted in a district court that had the effect of blocking a rescue plan.

Fiat has already been rebuffed once, and then shown the door at GM. But the Supreme Court has taken the view that some of Chrysler is better than none.

But it is the dropping of dealers that has caused the most surprise: they must immediately remove all Chrysler insignia, they cannot sell new cars nor do warranty work. It affects all Chrysler brands including Dodge and Jeep. The dealers had challenged the plans but the Court found against them.

The proposed agreement with Fiat calls for a dramatic reduction in the number of dealers. The company said that they had to keep costs down: the dealers said that the company needs them if it's going to sell cars. The company says it's still going to have almost 2300 dealers and that's enough. And Fiat agrees.

But the dealers have a point: they have argued that those that are being dumped had well over 40,000 cars in stock a month ago - and in that time have sold 16,000 of them. Now, they are having to consider what to do: the cars are held on a mix of sale-and-return to Chrysler, bank loans and paid-for-outright. For them, the biggest question is how quickly they cash-in those cars - and find something else to sell.