NEW YORK — Chrysler began a marathon bankruptcy court hearing Wednesday to persuade a judge to approve its plan to sell most of its assets to Italian automaker Fiat and save itself from liquidation.
The company was waiting to see whether Judge Arthur Gonzalez would approve the sale despite protests from a group of Indiana state pension and construction funds that hold less than 1 percent of Chrysler's secured debt. If Gonzalez OKs the sale, the automaker could emerge from bankruptcy within weeks.
After hearing about nine hours of testimony, the judge adjourned the hearing until today and anticipated it could stretch through Friday.
Attorneys for Chrysler said unloading the assets to a group led by Italy's Fiat Group SpA is the company's only hope to avoid selling itself off piece-by-piece. They said a leaner Chrysler could shift more easily to smaller, more fuel-efficient cars.
But Chrysler dealers, debt-holders and former employees said they are being steamrolled by the bankruptcy proceedings. Fiat could back out if the deal doesn't close by June 15.
On the other hand, by emerging so soon from bankruptcy protection, Chrysler would defy skeptics who insisted such a filing would leave the automaker mired in court for months.
Both Chrysler LLC and General Motors Corp., which now appears almost certain to file for bankruptcy protection, have been hobbled by the health and pension costs of tens of thousands of unionized retirees, in addition to slumping sales.
Bringing Chrysler and Fiat together would dramatically change the face of the country's third-largest automaker. The current plan calls for Fiat to bring a handful of its small cars to the United States in the coming years, filling one of Chrysler's biggest product gaps and pleasing a White House intent on making the nation's fleet of automobiles greener.
Chrysler itself entered bankruptcy with a handful of new vehicles in the works. It plans to begin selling an electric car next year and have six electric vehicles on the road by 2014.
Even if Chrysler comes out of bankruptcy, its challenges are just beginning. Until the Fiat vehicles arrive, it will have to rely on a product lineup that lost billions of dollars last year.
Even then, there is no guarantee Fiats will sell in this country, where they will compete against small cars from established automakers like Hyundai and Kia.
By Wednesday morning, parts suppliers, dealers and former employees had filed 337 objections to the Chrysler-Fiat deal, although most had been resolved or deferred before the start of Wednesday's hearing.
Some of the strongest opposition to the sale came from lawyers representing a pair of Indiana state pension funds and a state construction fund that own Chrysler bonds.
Three of the seven dealers that sell new Chrysler vehicles in the Charleston area were notified this month that they are losing their franchises as part of the company's restructuring.
Tom LaSorda, who served as Chrysler's vice chairman and president before retiring after the automaker went into Chapter 11, was questioned for more than an hour about Chrysler's search for a global partner and how the deal with Fiat came to be reached.
"There was nobody out there that was willing to provide a cash infusion," LaSorda said of Chrysler's search for a partner. "But Fiat brought technology and platforms that were just as valuable or even better."
Early in the hearing, Gonzalez denied a motion by the Indiana state funds' lawyers for more time to prepare for the sale hearing.
The three funds bought Chrysler bonds last year and hold a combined $42.5 million of the company's total $6.9 billion in secured debt.
In the days leading up to its bankruptcy filing, Chrysler reached an agreement with most of its bondholders in which they would receive a combined $2 billion in a deal worth 29 cents on the dollar.
But some bondholders refused to support it, saying that as secured lenders they deserved more.
Dan Strumpf of the Associated Press contributed to this report.