Fiat's deal to take a stake in a newly restructured Chrysler has been delayed further after the U.S. Supreme Court stated yesterday that it will look into the petition by the objectors led by a group of Indiana state funds that are trying to halt the sale of the failed carmaker's assets.

The trio of state pension funds are fighting against a decision by the New York Bankruptcy Court that handled the Chapter 11 procedure to approve the sale of the best Chrysler assets to a new company made up primarily of a union pension fund which will hold 55 percent and Italian carmaker Fiat which will get an initial 20 percent, although there are signs emerging that the Indiana funds' case is more motivated by politics than serious recovery of its investment as it is claimed that the funds stand to lose less than US$5 million from the Fiat deal.

The objecting funds, which account for just US$42.5 billion from a total of US$6.9 billion owed to secured creditors, took their case to the Court of Appeal in New York last week which also rejected their arguments which focus primarily on their belief that using TARP funds to prop up the ailing carmaker was an illegal action to take. The other creditors, led by JP Morgan Chase have already settled for a US$2 billion payout. However the Court of Appeal stayed the execution until 4:00 PM today to give the funds leave to appeal to the U.S. Supreme Court over the weekend, the highest court in the land whose decision on the matter will be final. The funds appealed to Justice Ruth Bader Ginsburg who considered the petition before issuing a brief one sentence statement to say that the sale of Chrysler assets "are stayed pending further order". The vague wording of the statement leaves the option open that the Justices might give the order for the deal to go ahead within the next few days.

Immediately had Justice Ginsburg issued the order than Fiat CEO Sergio Marchionne vowed that he will "never" walk away from Chrysler. Fiat has an option valid until June 15 to walk away from the deal without receiving financial penalty if problems arise. "We would never walk away," Marchionne replied when asked a question if Fiat could jump ship at the June 15 deadline, "never", he added. Instead he was upbeat saying that "we should just be patient and let the system work."

The Obama Administration which has thrown its full weight behind the deal with fIAT and pushed the Chapter 11 option downplayed the Supreme Court's decision. Bloomberg reported last night that 'an administration official who spoke on condition of anonymity said the stay is intended to give the court enough time to make a determination on the merits of the request.'  

Meanwhile there was consternation in the state of Indiana over the action being taken by its Treasurer Richard Mourdock. The Mayor of Kokomo Greg Goodnight said in a statement issued last night that "the future of Chrysler, the livelihood of thousands, the economic future of our city and state are now in jeopardy due to the questionable motives of our State Treasurer, Richard Mourdock." The city of Kokomo employs 4,600 workers in four Chrysler plants as well as being part of a nationwide supply chain structure that accounts for many more across the state of Indiana. "His motives are questionable, because I cannot believe that a liquidation of Chrysler’s assets would prove to be more financially beneficial to the State than protecting thousands of jobs for working Hoosiers. If the Chrysler-Fiat merger does not take place the services that state and local governments are expected to provide will be severely impacted if not eliminated, due to the economic crisis that will ensue. This will dwarf the losses Mr. Mourdock states a few Indiana bondholders may suffer. I can only hope that Mr. Mourdock has a plan to help the employees, retirees, communities, and supply-chain companies that are all tied to Chrysler and its future."

There has been much recent speculation that the attempt by the Indiana funds is more politically motivated that actually being about recovering funds, particularly as Mourdock has met several times recently with Indiana Governor Mitch Daniels who has been a fierce opponent of the state using taxpayer funds to bail out the failing automakers. Representative Gary Peters whose Michigan-D constituency is at the heart of Chrysler's manufacturing operations claimed yesterday that the Indiana funds were set to only lose US$4.8 million on their investment in Chrysler debt but the state would lose over US$20 million in annual tax revenue if Chrysler was liquidated as well as the costs associated with more than 4,000 people losing their jobs in the state. "It is quite clear that Indiana's case is not in the best interest of the people of Indiana," he told The Detroit News yesterday. "Their stakeholders, including other secured lenders and Chrysler’s autoworkers, accepted shared sacrifice because they recognised their interest was better served keeping Chrysler alive rather than forcing liquidation."