As Chrysler faced its first hearing Friday in Manhattan bankruptcy court, documents showed the automaker plans to close plants in Michigan, Missouri, Ohio and Wisconsin that employ about 4,800. Chrysler said they will be offered jobs at other plants.
Judge Arthur Gonzalez approved a series of motions at the swift hearing, launching a chain of events designed to ensure that Chrysler's bankruptcy process is the quick and "surgical" one the company and the U.S. government have promised.
What could prove to be the case's biggest challenge still lies ahead. Chrysler must deal with creditors who refused to come to a deal that would have erased much of the automaker's debt and might have prevented a bankruptcy filing.
Chrysler attorney Corinne Ball, of the firm Jones Day, said the loans and the sale to Fiat represent "an important lifeline" for Chrysler's dealers, supplies and customers.
"We have to move at a good speed throughout this proceeding," she told Judge Gonzalez.
Chrysler, the nation's third-largest car manufacturer, filed for bankruptcy protection Thursday after a group of creditors defied government pressure to wipe out the automaker's debt.
The company plans to emerge in as little as 30 days as a leaner, more nimble company, with Fiat potentially becoming the majority owner.
In return, the federal government agreed to give Chrysler up to $8 billion in additional financing, on top of the $4 billion the company already has received.
Ms. Ball said lawyers on Monday would ask to set a date for the first hearing on the sale of Chrysler's assets to the "new Chrysler." In bankruptcy, assets are sold in a two-part process during which the court asks for competing bids.
None is expected in Chrysler's case; documents show the company already tried to form alliances with dozens of companies, including Nissan-Renault, Toyota, Honda, Volkswagen and even General Motors Corp.
Heidi Sorvino, the bankruptcy partner at Smith, Gambrell & Russell LLP, said a sale could be completed in 30 to 60 days.
"I think the sale will happen quickly," she said. "The actual proceeding is going to take a long time."
Until the deal with Fiat closes, the automaker plans to idle all of its plants in the U.S. Chrysler's Canadian assembly plants also halted production Friday because of parts shortages stemming from the U.S. shutdown.
In court documents, Chrysler said it won't keep its Sterling Heights, Mich., plant that makes Chrysler Sebrings and Dodge Avengers, and the Detroit plant that makes Dodge Vipers. The St. Louis North plant that makes Dodge Ram pickups would also close.
Chrysler's Twinsburg, Ohio, parts stamping plant and Kenosha, Wis., engine plant will be shuttered.
Two other plants that will be left out of the Fiat sale are the St. Louis South plant and an assembly plant in Newark, Del., that were idled last year. Another plant, Chrysler's Detroit Axle plant, is already scheduled to be replaced by a new factory near Port Huron, Mich.
The "new Chrysler" would lease the eight plants, then shutter them by December 2010.
"While some facilities may close, substantially all Chrysler employees will be offered employment with the new company," Chrysler spokeswoman Dianna Gutierrez said. "Employees currently located at a facility identified for disposition will be offered a position at one of the facilities sold to the new company."
Judge Gonzalez approved Chrysler's motion to allow the automaker to pay $48.8 million in employee and contract worker pre-bankruptcy wages, benefits and businesses expenses.
The motion also references an estimated $86 million in employee vacation benefits that it might not ultimately have to pay.
The judge also approved Chrysler's motions that will let it continue to honor its warranties and continue its current banking practices.
It's uncertain when Judge Gonzalez will face objections from the creditors that hold $6.9 billion of the automaker's debt.
Four banks holding 70 percent of the debt agreed to a deal that would give the lenders 29 cents on the dollar. But a collection of hedge funds refused to budge, saying the deal was unfair because they deserve to recover more than other creditors such as the United Auto Workers.
President Obama on Thursday chastised the funds for seeking an "unjustified taxpayer-funded bailout" after Chrysler and his auto task force cleared the company's other hurdles, including the Fiat deal and a cost-cutting pact that the UAW ratified this week.
A hearing scheduled for Monday will allow Chrysler to ask Judge Arthur Gonzalez for permission for the company to start using $4.5 billion in loans from the U.S. and Canadian governments to keep operating under bankruptcy protection.