Plan to Sell Chrysler to Fiat Clears Bar

The judge overseeing the bankruptcy of Chrysler on Tuesday took a significant step toward allowing the sale of most of the automaker to Fiat, approving the bidding procedures advocated by the company and backed by the Obama administration.

The decision by the federal bankruptcy judge, Arthur J. Gonzalez, is a setback for a group of Chrysler creditors who have argued that liquidation of the company or some other transaction could yield greater value. These lenders, primarily investment firms, have said that the plan for the Fiat transaction ran afoul of bankruptcy law and would chill efforts by others to produce competing, potentially higher bids.

But Judge Gonzalez disagreed, saying, “The court concludes that the bidding procedures are appropriate and necessary.”

The judge’s decision was a victory for Chrysler and the government, which together argued that a speedy sale was the only way to protect tens of thousands of jobs and help resuscitate the American economy.

“It’s a very big first step,” said Howard Seife, the head of the bankruptcy practice at the law firm Chadbourne & Parke. “It’s clear that the company is moving down the road to a Fiat sale.”

The judge’s decision was the second blow dealt to the holdout lenders during a marathon hearing on Tuesday that began mid-afternoon and ended at 11 p.m.

Judge Gonzalez earlier ordered the disclosure of identities of the Chrysler creditors, who had argued that their identities should be kept secret to protect them from retaliation.

A lawyer representing them claimed that the creditors had been harassed, and some had even received death threats.

Judge Gonzalez gave the creditors until Wednesday morning to reveal their identities, saying that their lawyers had not presented enough evidence of risk. The primary evidence cited by their lawyers was a set of anonymous comments on The Washington Post Web site.

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