DETROIT -- Now the legal jockeying begins.
Chrysler LLC's filing for Chapter 11 reorganization will unleash a wave of legal petitions, motions and countermotions, as everyone with a stake in the automaker's future seeks to influence the reorganization plan.
At the first day of Bankruptcy Court hearings, which will be Friday morning, the automaker's lawyers and financial advisers will face off against creditors and others in what surely will be a large and very complex proceeding.
Dealers will be watching, too. "They will want to see how Chrysler will treat their dealership agreements," says lawyer Michael Fleming, a partner with the suburban Detroit law firm Plunkett Cooney. "Dealers will be particularly concerned with whether Chrysler will seek to reject their dealership agreements."
The judge in a bankruptcy has to balance two sometimes contrary goals: giving the troubled company a fresh start in a way that should allow it to be a viable concern; and ensuring a fair distribution of payments to creditors, including suppliers, workers, dealers and others.
To do that, the judge has extraordinary powers. While a bankrupt company's management typically continues to run operations, the judge has to approve almost every payment, every borrowing and every contract. Creditors can object if they feel the money isn't being spent properly.
In almost all jurisdictions of U.S. Bankruptcy Court, by the way, the judge is determined by the equivalent of drawing a name out of a hat filled with the names of available judges. Federal bankruptcy judges are appointed to their posts for 14 years.
Here are some issues that will be addressed in that first hearing.