US CARMAKER Chrysler, under orders by President Barack Obama to conduct a quick bankruptcy, will ask court approval to auction most of its assets in three weeks.

In a motion filed on Saturday with the US Bankruptcy Court in Manhattan, Chrysler said it would ask a judge today to approve the sale as part of its planned alliance with Italy’s Fiat.

The transaction would help create the world’s sixth-largest carmaker, a merger Chrysler wasn’t able to do outside bankruptcy because of opposition by some of its secured lenders.

The company asked US bankruptcy judge Arthur Gonzalez, who is in charge of the case, to approve an auction quickly. Chrysler wants a schedule that would require creditor objections to the sale to be submitted by May 11th and an auction held by May 22nd, according to a Bloomberg source.

The new entity, as yet unnamed, will be the lead bidder in the auction and offer $2 billion for most of Chrysler’s assets, while assuming some liabilities.

The new company would be owned by an employee association, Fiat, the US Treasury and the Canadian government, Chrysler has said.

Fiat’s 20 per cent stake could be increased to 35 per cent if the company meets certain milestones, the company has said.

The US Treasury is providing a $4.5 billion bankruptcy loan to help Chrysler reorganise.

Loan terms require the company to complete an asset sale to Fiat or close another comparable deal in less than 60 days, a timeframe personally set by Mr Obama.

Under bankruptcy law, offers for bankrupt companies or their assets are generally subject to the possibility of higher bids at a court-supervised auction. Michigan-based Chrysler must win approval of auction rules by May 9th and receive any competing offers by May 20th. It filed for chapter 11 bankruptcy on April 30th after a group of lenders rejected an offer by the US government that would have paid them $2.25 billion for $6.9 billion of debt.

Chrysler’s 22 factories in the United States were rendered idle on May 1st. – (Bloomberg)