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					                                                                     - 1 -




4    Case No. 09-50002

5    - - - - - - - - - - - - - - - - - - - - -x

6    In the Matter of:


8    CHRYSLER LLC, et al.


10                  Debtors.

11   - - - - - - - - - - - - - - - - - - - - -x


13                  United States bankruptcy court

14                  One Bowling Green

15                  New York, New York


17                  May 27, 2009

18                  10:03 AM


20   B E F O R E:






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                                                              - 2 -


2    HEARING re Motion to Appoint Official Non-Union, Non-Retiree,

3    Short Term, and Long Term Disabled Employee Committee Pursuant

4    to 11 U.S.C. 1114(d)


6    HEARING re Application of the Official Committee of Unsecured

7    Creditors of Chrysler LLC, et al. for Order Authorizing and

8    Approving the Employment and Retention of Kramer Levin Naftalis

9    & Frankel LLP as Counsel, Nunc Pro Tunc to May 5, 2009


11   HEARING re Motion of the Debtors for Entry of Agreed Interim

12   and Final Orders: (I) Authorizing Use of Cash Collateral; (II)

13   Granting Adequate Protection; and (III) Granting Related Relief












                                                           - 3 -


2    HEARING re Motion of Debtors and Debtors in Possession,

3    Pursuant to Sections 105, 363 and 365 of the Bankruptcy Code

4    and Bankruptcy Rules 2002, 6004 and 6006, for (I) An Order (A)

5    Approving Bidding Procedures and Bidder Protections for the

6    Sale of Substantially All of the Debtors' Assets and (B)

7    Scheduling a Final Sale Hearing and Approving the Form and

8    Manner of Notice Thereof; and (II) an Order (A) Authorizing the

9    Sale of Substantially All of the Debtors' Assets, Free and

10   Clear of Liens, Claims, Interests and Encumbrances, (B)

11   Authorizing the Assumption and Assignment of Certain Executory

12   Contracts and Unexpired Leases in Connection Therewith and

13   Related Procedures and (C) Granting Certain Related Relief


15   HEARING re Motion of Debtor Alpha Holding LP, Pursuant to

16   Sections 105, 363 and 365 of the Bankruptcy Code and Bankruptcy

17   Rules 2002, 6004 and 6006, for an Order (A) Authorizing the

18   Sale of Substantially All of Alpha Holding LP's Assets, Free

19   and Clear of Liens, Claims, Interests and Encumbrances and (B)

20   Granting Certain Related Relief





                                                             - 4 -


2    HEARING re Motion of Debtors and Debtors in Possession for

3    Entry of an Order Authorizing Debtor Chrysler LLC to Enter Into

4    a Settlement on the Terms Set Forth in the Binding Term Sheet

5    Among Chrysler LLC, Chrysler Holding LLC, Daimler AG, Cerberus,

6    the DC Contributors, and the Pension Benefit Guaranty

7    Corporation Pursuant to Rule 9019 of Federal Rules of

8    Bankruptcy Procedure


10   HEARING re Motion of Debtors and Debtors in Possession for

11   Entry of an Order (A) Authorizing the Debtors to Implement Post

12   Closing Modifications to Chrysler LLC's Governance Structure,

13   (B) Approving the Release of Officers and Directors and (C)

14   Authorizing the Debtors to Obtain Replacement Directors and

15   Officers Liability Insurance


17   HEARING re Motion of Debtors and Debtors in Possession for

18   Entry of an Order Approving the Tax Settlement Agreement Among

19   the DC Contributors, the CG Investment Group, LLC, Daimler,

20   Chrysler Holding, Chrysler and CCI Pursuant to Rule 9019 of the

21   Federal Rules of Bankruptcy Procedure




25   Transcribed by:   Lisa Bar-Leib
                                                             - 5 -


2    A P P E A R A N C E S :


4          Attorneys for Debtors and Debtors-in-Possession

5          222 East 41st Street

6          New York, NY 10017



9          LEE A. ARMSTRONG, ESQ.


11         RICHARD H. ENGMAN, ESQ.



14         Attorneys for Debtors and Debtors-in-Possession

15         51 Louisiana Avenue, N.W.

16         Washington, DC 20001




20         KEVYN D. ORR, ESQ.





                                                             - 6 -


2          Attorneys for Debtors and Debtors-in-Possession

3          1420 Peachtree Street, N.E.

4          Suite 800

5          Atlanta, Georgia 30309





10         Attorneys for Debtors and Debtors-in-Possession

11         325 John H. McConnell Blvd.

12         Suite 600

13         Columbus, OH 43215





18         Conflicts Counsel

19         One Penn Plaza

20         New York, NY 10119



23         FRANK A. OSWALD, ESQ.

24         SCOTT RATNER, ESQ.

                                                            - 7 -



3          Attorneys for Official Committee of Unsecured Creditors

4          1177 Avenue of the Americas

5          New York, NY 10036



8          ROBERT T. SCHMIDT, ESQ.

9          ADAM ROGOFF, ESQ.



12         United States Attorney's Office

13         Southern District of New York

14         86 Chambers Street

15         New York, NY 10007



18         TARA LA MORTE, AUSA

19         SEAN H. LANE, AUSA






                                                            - 8 -



3          Office of the United States Trustee

4          33 Whitehall Street

5          Suite 2100

6          New York, NY 10004






12         Attorneys for Lemberg Claimants

13         450 Lexington Avenue

14         New York, NY 10017





19         Attorneys for The Timken Company, Superior Industries and

20          Harman

21         1675 Broadway

22         New York, NY 10019



                                                            - 9 -



3          One Metropolitan Square

4          Suite 2600

5          St. Louis, MO 63102





10         Attorneys for Chrysler National Dealer Council

11         555 Twelfth Street, NW

12         Washington, DC 20004





17         Attorneys for Ohio Bureau of Workers' Compensation

18         45 Rockefeller Plaza

19         New York, NY 10111






                                                     - 10 -



3          Attorneys for Horton Chrysler

4          299 Park Avenue

5          New York, NY 10171





10         Attorneys for Certain Affected Dealers

11         200 Old Country Road

12         Mineola, NY 11501





17         Attorneys for Wayne Dodge Causeway Jeep

18         325 Columbia Turnpike

19         Florham Park, NJ 07932






                                                           - 11 -



3          Attorneys for United Auto Workers

4          330 West 42nd Street

5          New York, NY 10036





10         Attorneys for Mitsubishi Motors North America

11         620 Eighth Avenue

12         New York, NY 10018





17         Attorneys for Oakland County Treasurer; Wayne County

18          Treasurer; Hoegh Autoliners

19         200 Campus Drive

20         Florham Park, NJ 07932





                                                           - 12 -



3          Attorneys for Chrysler Financial Services Americas LLC

4          1301 Avenue of the Americas

5          New York, NY 10019



8          JUDY G.Z. LIU, ESQ.

9          PHIL ABELSON, ESQ.



12         Attorneys for GETRAG Mfg., Tower Auto and Meridian Auto

13         One Detroit Center

14         500 Woodward Avenue

15         Suite 2700

16         Detroit, MI 48226









                                                           - 13 -



3          Attorneys for Cummins Inc.

4          321 North Clark Street

5          Suite 2800

6          Chicago, IL 60610


8    BY:   JILL I. MURCH, ESQ.



11         Attorneys for Bridgestone Tire

12         2 Park Avenue

13         New York, NY 10016





18         Attorneys for Ad Hoc Committee Seeking Fairness for

19          Warranty and Lemon Law Claimants

20         30 East Butler Pike

21         Ambler, PA 19002


23         BY:   AMY BENNECOFF, ESQ.


                                                    - 14 -



3          Attorneys for Steel Technologies, Inc.

4          292 Madison Avenue

5          17th Floor

6          New York, NY 10017





11         1100 Summer Street

12         Stamford, CT 06905





17         Attorneys for UAW Retiree Class

18         1350 Broadway

19         Suite 501

20         New York, NY 10018



23         HANAN B. KOLKO, ESQ.


                                                           - 15 -


2          Attorneys for Mike Finnin Motors & Gurley Jeep Dodge

3          Park Avenue Tower

4          65 East 55th Street

5          New York, NY 10022





10         1200 K Street NW

11         Washington, DC 20005





16         Attorneys for Performance Dodge, et al.

17         1345 Avenue of the Americas

18         New York, NY 10105



21         RUSSELL P. MCRORY, ESQ.




                                                           - 16 -



3          Attorneys for JPMorgan Chase Bank, as Agent

4          425 Lexington Avenue

5          New York, NY 10017



8          PETER V. PANTALEO, ESQ.




12         Attorneys for Ad Hoc Committee of Chrysler Victims

13         1000 Market Street

14         Suite 3600

15         Philadelphia, PA 19103






21         Attorneys for Certain Affected Dealers

22         675 Third Avenue

23         New York, NY 10017


                                                           - 17 -



3          Attorneys for PBGC

4          1221 Avenue of the Americas

5          New York, NY 10020





10         Attorneys for Amy Brown Beowolf Committee of Chrysler

11         Affected Dealers

12         221 East Fourth Street

13         Suite 2900

14         Cincinnati, OH 45202





19         Attorneys for UAW Retirees Class

20         1007 Mt. Royal Blvd.

21         Pittsburgh, PA 15223




                                                           - 18 -



3          Attorneys for Ohio Motorola Mfg.

4          2121 Avenue of the Stars

5          Suite 2800

6          Los Angeles, CA 90067





11         Attorneys for Unsecured Committee Member Patricia

12          Pasquale, Tort Creditor

13         2323 Bryan Street

14         Suite 2200

15         Dallas, TX 75201





20         Attorneys for Fiat and Purchaser

21         1888 Century Park East

22         Los Angeles, CA 90067



                                                           - 19 -


2          Attorneys for Fiat and Purchaser

3          125 Broad Street

4          New York, NY 10004



7          JOHN L. WARDEN, ESQ.

8          STEVEN L. HOLLEY, ESQ.



11         Attorneys for Overseas Military Sales Corporation, Ltd.

12         3 Barker Avenue

13         Third Floor

14         White Plains, NY 10601





19         Attorneys for Export Development Canada (EDC)

20         1633 Broadway

21         47th Floor

22         New York, NY 10019



                                                  - 20 -



3          Attorneys for the Indiana Pensioners

4          1155 Avenue of the Americas

5          New York, NY 10036



8          THOMAS E. LAURIA, ESQ.

9          KAREN M. ASNER, ESQ.



12         Attorneys for Comerica Bank

13         6th Floor at Ford Field

14         1901 South Antoine Street

15         Detroit, MI 48226










                                              - 21 -



3          Attorneys for Ford Motor Company

4          450 Lexington Avenue

5          New York, NY 10017






11         Attorneys for AK Steele

12         2200 PNC Center

13         201 East Fifth Street

14         Cincinnati, OH 45202











                                        - 22 -



3          Attorneys for AK Steele

4          Lexington Financial Center

5          250 West Main Street

6          Suite 2800

7          Lexington, KY 40507






13         Attorneys for Plastoform

14         40950 Woodward Avenue

15         Suite 100

16         Bloomfield Hills, MI 40950









                                                            - 23 -



3          Attorneys for Goodyear Tire and Rubber, et al.

4          221 East Fourth Street

5          Suite 2900

6          Cincinnati, OH 45202






12         Attorneys for Worthington Industries

13         52 East Gray Street

14         Columbus, OH 43216











                                                    - 24 -



3          Attorneys for Valeo, Inc. and WeBridge

4          2290 First National Building

5          660 Woodward Avenue

6          Detroit, MI 48226



9          E. TODD SABLE, ESQ.




13         Attorneys for Eberspaecher

14         201 West Big Beaver Road

15         Suite 60

16         Troy, MI 48084









                                                            - 25 -



3          Attorneys for Chrysler National Dealer Council

4          555 Twelfth Street, NW

5          Washington, DC 20004






11         Attorneys for Dow Chemical Co.

12         LibertyView

13         457 Haddonfield Road

14         Suite 700

15         Cherry Hill, NJ 08002










                                        - 26 -



3          Attorneys for Eberspaecher

4          24901 Northwestern Highway

5          Suite 611

6          Southfield, MI 48075






12         201 Park Avenue

13         New York, NY 10166












                                                          - 27 -



3          Attorneys for Bentler Automotive Corp.

4          Calder Plaza Building

5          250 Monroe Avenue NW

6          Suite 800

7          Grand Rapids, MI 49503






13         Attorneys for Automotive Components Holdings

14         3001 West Big Beaver Road

15         Suite 600

16         Troy, MI 48084


18   BY:   KYLA K. STEPP, ESQ.

19         SCOTT A. WOLFSON, ESQ.






                                                        - 28 -



3          Attorneys for Southwest Research Institute

4          300 Convent Street

5          Suite 2200

6          San Antonio, TX 78205







13         Pro Se Petitioner

14         1715 Gilbert Road

15         Toledo, OH 43614










                                                              - 29 -

                             CHRYSLER LLC, et al.

1                            P R O C E E D I N G S

2             THE CLERK:     All rise.

3             THE COURT:     Please be seated.   All right.   Before we

4    begin, to the extent you want to take off your jackets, feel

5    free to do so.   Trying to get it cooled off in here, but I

6    don't know how successful we'll be.

7             The first matter I wanted to address this morning was

8    the district court's order with respect to the withdrawal of

9    the reference.   And I wanted to begin with movant, Mr.

10   Lauria -- where are you -- or Mr. Kurtz.

11            MR. KURTZ:     Good morning, Your Honor.   Glenn Kurtz.

12            THE COURT:     And one other announcement before you

13   leave -- before you begin.    623 will be available -- is

14   available now but this proceeding is not being videoed in there

15   right now until Judge Lifland concludes his hearings which will

16   approximately be 10:15.    So if you want to go to 623 to be more

17   comfortable, you can wait a few minutes and these proceedings

18   will be played there at approximately 6:15 [sic].

19            All right.     Go ahead, Mr. Kurtz.

20            MR. KURTZ:     Good morning, Your Honor.   Glenn Kurtz on

21   behalf of the Indiana Pensioners.     I am expecting Mr. Lauria to

22   participate in today's hearing.     When I came here, there was a

23   large line to get through security this morning and I suspect

24   that that's where he is.    Nonetheless, I am prepared to address

25   the Court's question.
                                                              - 30 -

                             CHRYSLER LLC, et al.

1             I think the short answer is that the district court

2    ruled that the Indiana Pensioners have standing to raise the

3    TARP challenge and that this Court should determine the merits

4    of that challenge in the first instance.

5             Some context is appropriate for this, Your Honor.        We

6    moved, under Rule 157, to withdraw the reference with respect

7    to the sales motion and the trustee motion.     We argue that they

8    raised questions that arose under the laws of the United States

9    and, specifically, that there were violations of the

10   Constitution in TARP.   Two primary violations.   One was the

11   misuse of TARP funds to finance the 363 sale.     And, two, the

12   effective takeover by the government with respect to the debtor

13   and his process.

14            That was opposed by every major constituency in this

15   case, including the debtors, the United States trustee, the

16   creditors' committee, the administrative agent and Canada.

17   They made two primary arguments.   They argued that these

18   matters were intertwined with the bankruptcy law issue so they

19   should be decided in the first instance by this Court.     And

20   they argued, and this was really their primary objection, that

21   we lack standing to raise any challenge under TARP.

22            That took up most of their papers and was the major

23   subject of argument before Judge Griesa.   Against that

24   backdrop, the Court ruled.   The Court agreed with the

25   opposition that there were bankruptcy law issues that were very
                                                             - 31 -

                             CHRYSLER LLC, et al.

1    intertwined with the TARP issues, and that this Court had done

2    a lot of work, was at the end of the process and should have

3    the opportunity in the first instance to rule.

4                And Judge Griesa overruled the challenge by the

5    opposition as to standing.    The Court made that clear, I

6    believe, Your Honor, in two ways.    In the first way, on page 5

7    of the decision, the judge said, "There is certainly a need to

8    interpret ESSA and TARP.     And I would submit to Your Honor that

9    the only way that there would be a need to interpret those

10   statutes is if there was somebody who had standing to raise

11   that dispute, to make that a justiciable controversy, and so I

12   don't believe the Court needed to go any further to specify

13   standing.    But in the interests of avoiding any doubt and

14   perhaps later dispute, the Court, in fact, did so in the last

15   paragraph before the conclusion of his decision, on page 6,

16   where he said "There should be a word about the issue of

17   standing.    The issue has been discussed extensively in the

18   briefs.     There is no time for a full discussion in this

19   opinion."    And I'll pause there to say that Judge Griesa, aware

20   of the time constraints here, told us that he would do

21   everything he could to put an order together by 4 p.m. and that

22   wherever he was on that order he would issue it.

23               The Court continues, "The Court simply reiterates

24   what was said at the hearing and that is that the Indiana Funds

25   have standing to make their motion to withdraw the reference
                                                              - 32 -

                              CHRYSLER LLC, et al.

1    and to make the related motions."    I think, Your Honor, that is

2    law of the case and it determined that the Indiana Pensioners

3    have standing to raise the TARP violations and that Your Honor

4    is to decide that matter in the first instance on the merits.

5             THE COURT:     Well, let me hear from the other parties

6    as to their view.

7             MR. KURTZ:     Thank you, Your Honor.

8             THE COURT:     Thank you.

9             MS. BALL:      Good morning, Your Honor.   Corinne Ball

10   for Chrysler.   Your Honor, we have not had the benefit yet of a

11   transcript, but I would suggest Your Honor it might be helpful.

12   I think that Judge Griesa was clear that the Indiana Pensioners

13   have standing under Section 1109 to make the motion to withdraw

14   the reference, to make the motion for a stay and to make the

15   motion for a trustee.    No one challenged their standing as a

16   party-in-interest under 1109.    And I think the transcript would

17   reveal that Judge Griesa clearly established that.

18            Second thing, Your Honor, that I think is true and I

19   think Mr. Kurtz referred to it as to how is this intertwined

20   with this proceeding.    As the seller, Chrysler clearly has

21   concern and an interest making sure that the buyer has funding

22   and the wherewithal to perform under the purchase agreement.

23   We would point out to Your Honor that the United States has

24   filed a brief last night demonstrating to our satisfaction that

25   they have complied with TARP and that this loan should not be
                                                             - 33 -

                            CHRYSLER LLC, et al.

1    endangered.   But, Your Honor, I believe that would suggest to

2    all of us the extent to which it is intertwined and why it's

3    part of these sale hearings.

4             Thirdly, Your Honor, I think no one reached the issue

5    yesterday in terms of whether or not the ability to make the

6    argument under the Constitution about an unconstitutional

7    taking was not reached by decision.   However, Your Honor, I

8    think that Chrysler believes that the Indiana Pensioners

9    contracted away their right to argue that this is an

10   unconstitutional taking and perhaps Your Honor would need to

11   confirm that position because I do think that was left open.

12   With that, Your Honor, I think that would conclude Chrysler's


14            MS. VARGAS:    Good morning, Your Honor.    Jeannette

15   Vargas, Assistant United States Attorney on behalf of the

16   United States Department of the Treasury.     We would agree with

17   counsel for the debtors that the judge's ruling with respect to

18   standing was more limited than has been suggested.     Again,

19   without the transcript, it is, we're at a bit of a deficit.

20   But the judge's only comments about standing, in a substantive

21   manner at the hearing, referred to, as Ms. Ball has stated,

22   interested-party standing under the Bankruptcy Code.

23            He did not address, for example, the issues that we

24   had raised regarding the specific ESSA standing issue such as

25   the injunctive provision in the statute that prohibits judicial
                                                               - 34 -

                              CHRYSLER LLC, et al.

1    review of the Secretary of the Treasury's actions allocating

2    TARP funds.    He did not address the zone of interest arguments.

3    He simply stated in his opinion that they have standing to make

4    a motion to object to the sale.       And we do not dispute that

5    they have standing to object to the sale, except perhaps as

6    relates to their standing under the contract.       That is an issue

7    best addressed by Simpson Thacher.      But the United States

8    Department of Treasury takes no position as to that.       We were

9    talking about constitutional standing and standing under the

10   statute itself.    And we don't believe that the judge's decision

11   has precluded that.

12               THE COURT:   All right.   Thank you.   Anyone else?    Mr.

13   Mayer?

14               MR. MAYER:   Yes, Your Honor.   We join with the

15   debtors in their position.     We also note that my

16   understanding -- again, without the transcript, it's difficult

17   to be precise.    But Judge Griesa was concerned about the degree

18   of bankruptcy work that needed to be done, and I think felt

19   that it was appropriate that the bankruptcy court do work-

20   related bankruptcy issues.    And I wish to proceed.

21               THE COURT:   All right.   Before you go sit down, this

22   is a question I could have asked anyone else, but I'll start

23   with you.

24               MR. MAYER:   Oh boy.

25               THE COURT:   The 363(m) issue -- I mean doesn't that
                                                             - 35 -

                              CHRYSLER LLC, et al.

1    come into play?   I mean, in the context of -- I believe it's

2    raised by the Indiana Funds that you couldn't have a finding on

3    the 363(m) with good faith unless the government was acting

4    under the authority of law.

5             MR. MAYER:      Well, Your Honor, it is a novel argument

6    if you take a look at the cases under 363(m) and, I think, a

7    finding under 363(m) is an essential part of this proceeding.

8    But so long as the process was done with notice and people had

9    the ability to participate, I won't pretend there are other

10   cases out there involving government intervention in connection

11   with a statute adopted by Congress.    But there are other cases

12   out there dealing with -- did the Chapter 7 trustee jump

13   through all the hoops?    Were there any procedural

14   irregularities with the sale?    And the cases do seem to weigh

15   in favor of if there is notice and people had the opportunity

16   to be heard then a finding of good faith is appropriate even if

17   it turns out there were other issues along the way.

18            There's, I think, one particular case in which one of

19   the bidders was found to have committed an unrelated fraud.

20   And this put some faith -- some question into the bona fides of

21   that particular bidder.     And the Court said that's really not

22   relevant to the question of whether the sale process itself was

23   done in good faith.   And therefore, Your Honor, I think -- and

24   what I think parties are prepared to get to today is whether or

25   not the process by which this company is being sold was done in
                                                              - 36 -

                             CHRYSLER LLC, et al.

1    good faith and whether or not TARP authorized it is for minds

2    greater than mine to address.    But I don't think the two are

3    necessarily linked.

4               THE COURT:   All right.   Thank you.   All right.    Mr.

5    Kurtz?    Just respond briefly and then we'll move onto the next

6    matter.

7               MR. KURTZ:   I will be very brief, Your Honor.      The

8    idea that there is no challenge to standing under 1109 is

9    irrelevant.    Standing is not such a flexible concept to

10   challenge.    And this is in most of the pages of the opposition,

11   and can be confirmed on the record, was that the Indiana

12   Pensioners had no standing to argue that the government was

13   violating TARP and the constitution in connection with the

14   misuse of TARP funds and their take-over of Chrysler here.

15   That was what the Court decided and the Court decided that it

16   had -- that the TARP interpretation had to happen in the first

17   instance at this Court and that the Indiana Pensioners had the

18   standing to raise that issue.   There is no suggestion that they

19   can raise the issue under one set of standing, but not raise

20   the issue under another set of standing.    And, of course, the

21   debtors have no response to the Court's specific quote that

22   there is certainly a need to interpret ESSA and TARP here

23   which, of course, would have to be on the merits.

24              The only other issue that I wanted to comment on is

25   the government apparently says that it filed a brief as to its
                                                              - 37 -

                              CHRYSLER LLC, et al.

1    authority here.    I haven't seen that brief.    We certainly would

2    like the opportunity to review it and respond to it

3    appropriately.     I think there's been a schedule here that's

4    permitted -- you know, responses and papers to come in and

5    having that come in perhaps in the wee hours or perhaps this

6    morning, I don't know, strikes us as inappropriate.

7             And on a related matter, I think, Your Honor, we

8    filed a motion this morning for a continuance.     the grounds are

9    set forth in --

10            THE COURT:     We haven't gotten there yet.

11            MR. KURTZ:     All right.    I'll just note that we

12   continue to get hundreds of thousands of pages of documents

13   into last night.     They haven't even been uploaded; they

14   certainly haven't been reviewed.      They weren't available to be

15   used in any of the depositions and, at this pace, we are

16   concerned that we simply have not had an adequate opportunity

17   to bring to the Court's attention all of the relevant evidence.

18            We're aware that the Treasury Department has set June

19   15th as a closing date.     We question the ability of the

20   government to set its own urgency.      It's sort of the melting

21   ice cube that --

22            THE COURT:     I think you're going beyond the point of

23   which -- I said I'll address that later.

24            MR. KURTZ:     Okay.   Your Honor, I just want to --

25            THE COURT:     No, I know.
                                                               - 38 -

                              CHRYSLER LLC, et al.

1              MR. KURTZ:    I want to just preserve my request for a

2    continuance.

3              THE COURT:    I'll get to it.   Thank you.

4              MS. VARGAS:    Your Honor, Jeannette Vargas on behalf

5    of the government.    With respect to Mr. Kurtz' request to

6    strike, the deadline for filing responses to the objections was

7    noon yesterday.     We filed before noon yesterday.    I believe we

8    actually filed about 11 a.m.     The docket will reflect that.

9    There was no untimely filing.

10             THE COURT:    All right.   As far as this matter is

11   concerned, as debtors' counsel said, we don't have the

12   transcript yet.     I would appreciate being furnished with the

13   transcript when it is available, coupled with a full set of the

14   briefs that were filed in that proceeding before the district

15   court.   And to the extent it's necessary to address this again,

16   I will do so at some time later in these proceedings.

17             All right.    Now, I have not seen the motion for a

18   continuance.     I don't know when it was filed.   But if you now

19   want to argue your motion, go ahead.

20             MR. KURTZ:    Thank you, Your Honor.     I won't -- or at

21   least, I'll try not to repeat the same points.

22             I think where I left off is the June 15th date exists

23   because the Treasury Department put it into the agreements and

24   made it exist.    And I question the ability of the Treasury

25   Department to create the exigent circumstances and then lever
                                                           - 39 -

                            CHRYSLER LLC, et al.

1    them to basically push through a case of extraordinary

2    complexity in size in what I think is largely an unprecedented

3    timeframe.

4             I would also note, Your Honor, that we have sort of

5    the concept of a melting ice cube here, but given that is the

6    Treasury Department's discretion to either terminate the

7    agreement or not that it's more tantamount to taking the ice

8    cube out of the freezer, putting it in the sun and then saying

9    let me sell it quickly before it melts.

10            I also would note and I think we will put evidence in

11   this that we have an e-mail even from debtors' lead counsel

12   that suggested that the timeframe that we are now following was

13   "impossible, that it was a big mistake, that it risked

14   credibility, and that it would effectively require people to

15   stuff a judge".   That was the quote.

16            I think, fundamentally, it's very difficult for us to

17   present the proper defense here given the timing.   I think the

18   fact that we're still receiving documents that we haven't even

19   uploaded much less reviewed and couldn't use at a deposition

20   has really tied our ability to put on an effective challenge to

21   the sales motion.   I don't see why there are circumstances that

22   would warrant precisely that kind of a treatment, and I think

23   that to the extent that the proponents of the 363 sale were

24   interested in having this done on a super-expedited basis, it

25   was incumbent on them to then provide the discovery on the same
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1    super-expeditious basis so that we could at least have an

2    opportunity to review it.

3              THE COURT:    All right.   Thank you.

4              MR. KURTZ:    Thank you, Judge.

5              THE COURT:    Any response?

6              MR. LERNER:   Your Honor, if I could join in --

7              THE COURT:    Mr. Lerner want to support?

8              MR. LERNER:   Good morning, Your Honor.     Stephen

9    Lerner of Squire Sanders & Dempsey on behalf of the committee

10   of Chrysler Affected Dealers.

11             Your Honor we have not seen the Indiana Pensioner's

12   motion for continuance but we would support it.       We believe

13   there has been a fundamental lack of due process provided the

14   Affected Dealers who have been given literally less than a week

15   to proper notice of the requests that are being made by the

16   debtor.

17             THE COURT:    What they received notice of in less than

18   a week is whether or not their dealerships would be rejected.

19   They did not receive notice a week ago that this sale

20   proceeding was going to take place on May 27th.

21             MR. LERNER:   Your Honor, I understand.     It's the

22   position of the Affected Dealers that until they were

23   identified specifically by the debtors, through an overnight

24   delivery received on May 14th, they didn't know whether their

25   rights would be affected and that the prior notice was
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1    deficient in that it didn't describe the impact that the sale,

2    as opposed to the motion to reject, would have on their rights.

3               THE COURT:    They certainly were aware their rights

4    could be impacted.

5               MR. LERNER:    With respect to the motion for

6    continuance I would simply note, in addition to what Mr. Kurtz

7    said, that we also have been provided with almost 500,000 pages

8    of documents in the course of four or five days most of which

9    were unable to be accessed prior to the time for deposition or

10   today's hearing.   And we believe there's been substantial

11   prejudice and that the motion for continuance should be

12   granted.   Thank you.

13              THE COURT:    All right.   Thank you.   Mr. Mayer, you

14   want to respond?

15              MR. MAYER:    I just -- I made reference to some cases.

16   I have cites if you wish them, Judge.     I think the relevant

17   authority for the question of 363(m) is probably In re Colony

18   Hill Associates, 111 F.3d 269 in the Second Circuit in 1997,

19   and the more interesting, although slightly off-point case, of

20   Base v. Babbit, B-A-B-B-I-T, at 2008 WL 800579, which is a

21   Southern District 2008 case.

22              THE COURT:    All right.   Thank you.   The debtor in

23   response to the motion for a continuance?

24              MS. BALL:    Your Honor, we haven't seen it, but, sight

25   unseen, I think we have two brief remarks.
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1             One, Your Honor, you have ruled repeatedly that there

2    is going to be irreparable harm here.   And I think that there

3    is nothing that has come to light, and I haven't seen the

4    motion but it wasn't mentioned this morning, that would change

5    that.

6             Secondly, Your Honor, I think Mr. Kurtz and the

7    Indiana Pensioners who were aware of the sale created the

8    problem by avoiding discovery until May 20th.

9             In terms of the timetable, Your Honor, need I say

10   that there were many timetables discussed and there was much

11   pushing and shoving and fighting for days and dollars.     So that

12   statement may have been out of context, but most importantly,

13   Your Honor, as you will hear later this morning from my

14   colleague Mr. Cullen, I understand that the Indiana Pensioners

15   have agreed that the MTA, the master transaction agreement,

16   Your Honor, that was filed with you, filed with the Court, will

17   be part of the evidentiary record of this morning.

18            And Your Honor it's a small, perhaps a small claim,

19   but the June 15th date -- Your Honor, it's important we

20   understand we have a buyer here.   The June 15th date comes from

21   Section 10.01(c), and may I suggest to you there the person

22   that has the walk-away rights on June 15th, that decision is

23   controlled by Fiat.   And it is in the purchase agreement with

24   our buyer that while there are milestones, Your Honor, in our

25   debtor-in-possession financing, this is not one of them.    If
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1    Your Honor would like to see the provision, I'd be happy to

2    share it with you, if I may approach.

3               THE COURT:   Yes, you may.     All right.   Thank you.

4    All right.   Anyone else with respect to the request for a

5    continuance?    committee?   All right.   Mr. Kurtz, do you want to

6    respond?

7               MR. KURTZ:   Your Honor, with respect to the timing on

8    this, it was of course the government and the debtors that set

9    the schedule.    They set the objection deadline for the 19th.

10   That was complied with.      The Indiana Pensioners retained me on

11   the evening of the 18th and the morning of the 19th.        We moved

12   as quickly as we could move in these extraordinary

13   circumstances and I don't see how our compliance with the order

14   in terms of filing an objection, which made it a contested

15   matter as to which we were then entitled to discover, could be

16   held up.   In any case, the schedule was established to set this

17   as a contested matter as of the 19th upon the receipt of

18   objections and I believe it was incumbent on the plan

19   proponents or the sale proponents to be in a position to

20   produce the relevant information during the right time period,

21   at whatever cost to them and that the production of hundreds of

22   thousands of pages to us last night simply made it impossible

23   for us to present the defense that we need to present

24   effectively.

25              Also, I would note, Your Honor, that there is a
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1    thirty-day extension period from June 15th until July 15th in

2    the event that government approval has not been obtained.        We

3    have no evidence that government approval has been obtained.

4    If it's not then the date is not June 15th at which there is a

5    walk-away right.   The date is July 15th.

6              THE COURT:    Mr. --

7              MS. VARGAS:    Your Honor --

8              MR. MAYER:    I'm sorry to have missed my cue, Your

9    Honor.   The committee is in favor of having this deal proceed

10   as expeditiously as possible.    There are real world

11   consequences to suppliers, dealers and other parties from

12   delay.   There are dealers with their own debt clocks ticking

13   who need to get back to selling cars.    If this deal is pushed

14   off, they may not be able to continue.      There are suppliers who

15   need to continue to ship with a company that right now isn't

16   actually buying products with gates that are closed.

17             The issues being played out here are not merely those

18   of lawyers looking at papers.    There are literally hundreds of

19   thousands of jobs hanging on whether or not this company will

20   survive and delay is no one's friend.    Thank you.

21             MS. VARGAS:    Your Honor, Jeannette Vargas for the

22   government.   I just wanted to rise briefly to address one of

23   the last comments made by Mr. Kurtz which is that this only

24   became a contested matter on the 19th.      Most of the -- the

25   continuous goes not to the sale order but to the bidding
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1    procedures order which set the schedule and set this date as

2    the date for the sale hearing.      There was an objection deadline

3    for the bidding procedures order.     The Indiana Pensioners did

4    not object to the setting of the dates.     They therefore waived

5    their challenge to have this date moved.     They could have made

6    it a contested matter at that time.     They elected not to.   And

7    they can't be heard here today on this issue.

8             THE COURT:    All right.    The Court rules as follows,

9    the record of all the relevant Chrysler hearings to date

10   supports a need to proceed as scheduled.     The motion for

11   continuance by the Indiana Funds as joined by certain affected

12   dealers is denied.

13            We will now proceed.    As indicated, I believe, on a

14   notice that was sent out on Friday or Thursday, there will no

15   oral opening statements, but opening statements to the extent

16   parties wished to prepare them and submit them would be done in

17   writing, electronically, and we would proceed this morning with

18   the hearing of the evidence when the sale process began.

19            We may have one or two other matters to deal with

20   first, but just a note that we're not going to have opening

21   statements other than what was submitted electronically.

22            So continuing on the calendar, I think we have --

23   what do we have first, the retention?

24            MS. BALL:    Your Honor, I believe first we have the --

25   we can take the retention of Kramer Levin.     But first, we had
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1    the pro se -- the pro se action of Mr. Wilson.

2                THE COURT:   Of Mr. Wilson?   All right.   Go ahead.

3                MR. BALL:    Your Honor, I think the remedy for Mr.

4    Wilson will be a further adjournment, but filed on the docket

5    on May 22nd 2009, docket number 1963, there was a notice of

6    filing of certain designated employee related agreements and

7    plans.   Your Honor this was the notice of plans that are to be

8    assumed by New Chrysler as we discussed at our last hearing on

9    May 20th.

10               Your Honor, in that document the plan that Mr. Wilson

11   is, in which he is a participant -- has been identified as an

12   assumed plan by New Chrysler.      I hasten to point out, however,

13   Your Honor, while this is a positive step forward -- and

14   certainly I have that document if it would assist the Court.

15   If Your Honor would like me to approach, I can point out the

16   plan.

17               THE COURT:    Yes, please.

18               MS. BALL:    Your Honor may recall that the first step

19   is designation of items to be assumed by New Chrysler which New

20   Chrysler has done with the employee benefit plans listed on

21   that notice.    There is a secondary step however, Your Honor.

22   As a technical matter we have to await a confirmation notice

23   from New Chrysler.      So we would suggest that Mr. Wilson's

24   matter be adjourned until June 3rd because the confirmation

25   notice which we have every reason to believe would be
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1    forthcoming, should be due before then, and that notice, Your

2    Honor, would settle this matter.

3              THE COURT:    All right.   Mr. Wilson, are you on the

4    phone?

5              MR. WILSON:    Yes, Your Honor, thank you.   And good

6    morning and thanks again for this privilege, Your Honor.     I

7    heard Ms. Ball's comments and had a chance to review the list

8    of plans that she's referencing.

9              The only concern that I had, Your Honor, and perhaps

10   this is something that could be clarified before June 3rd, is

11   that the list is alphabetically arranged and there are several

12   striking differences with the groups that are listed.     Some of

13   them have very clear specific responsibility listed for the

14   group.   For example, under Metropolitan Life the language is

15   over a dozen entries that, is specifically talking about the

16   plan, the contact person, the address, the group policy, that

17   sort of thing.

18             Under Wells Fargo, for example, they point out that

19   right down to the finite plan of a surviving spouse's car

20   benefit program and their long-term disability benefits plan

21   are numbered.

22             When you come to Sedgwick, Your Honor, it just, it

23   talks about the Sedgwick claims section, section stating that

24   the benefits agreement is for administration of disability

25   services without laying out any specific contact person,
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1    addresses, comments and no breakdowns of the plan.     So it -- it

2    encompasses everything including short-term disability and

3    whatever else that Sedgwick was doing without any specificity

4    and that was my only concern.

5             And I understand what Ms. Ball was saying.      We would

6    just respectfully ask that it be clarified a little bit so that

7    it's in alignment with the other plans that are listed so that

8    at least the purchaser has a clear understanding of what they

9    are purchasing when they do come to that, their acceptance if

10   they -- or confirmation motion.

11            As Your Honor knows, there's about 250 of us in this

12   long-term disability group.     We're non-bargaining, non-union,

13   non-retiree groups.   And, you know, we're in limbo and,

14   obviously, until that's done.    And I appreciate what Ms. Ball

15   is saying.   We thank them -- the company, by the way, for

16   replacing the bounced checks that were out there, and thank

17   them for funding May's plan.    We're just concerned about you

18   know what happens for the future here and since the other plans

19   were so specific, I mean the UAW, the retirees, the salaried

20   workers, all know what they will receive if their plans are

21   confirmed.   And we're -- our group is not here for any health

22   benefits or cars or anything like that.     We're here just for

23   our long-term benefits which we feel that we have a vested

24   interest in, Your Honor.   There's -- the 250 of us have placed

25   around $8,750,000 of our SSDI awards into Chrysler's hands over
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1    the years, and that was set against offsetting some loans, our

2    continued benefits.   So we just hope that we're here today with

3    our hats in our hands.    We have no leverage or we don't have a

4    bargaining unit or the actuarial tables aren't even in our

5    favor, Your Honor, and --

6             THE COURT:    All right.

7             MR. WILSON:     -- we're running kind of the gamut of

8    severed limbs and heart attack and amputations and mental

9    illness, so --

10            THE COURT:    All right.     I understand Mr. Wilson.    I

11   think what we should do then is adjourn this to June 3rd at

12   10:00, and if the sale were approved and confirmation was

13   received, we -- at that point, I think all the clarification

14   that you may need will be supplied.

15            MR. WILSON:     I understand, sir.   Is there any remedy

16   if that confirmation notice doesn't carry through?     Do we have

17   any time schedule of objections that we need to make or --

18            THE COURT:    I'm not sure.

19            MR. WILSON:     Okay.

20            THE COURT:    I think we'll have to wait and see.

21            MR. WILSON:     Okay.

22            THE COURT:    There is no timetable set.    I'm not sure

23   what remedy there would be if the confirmation isn't received,

24   but we will address that on June 3rd if it's relevant.

25            MR. WILSON:     Okay, sir.
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1                THE COURT:    All right.   Thank you.

2                MR. WILSON:    Thank you very much, Your Honor.

3                MS. BALL:    Thank you, Your Honor.     And we will in the

4    interim reach out to Mr. Wilson to help him understand that

5    Sedgwick is a processor for a particular plan that is on the

6    schedule.    On the assumption that we have sale approval, we

7    would be more than willing to do that.

8                Your Honor, as a housekeeping matter, if I may, we

9    did deliver our opening statement this morning.         We're having

10   some difficulty getting it electronically filed.         It's in

11   process of doing that, but -- and we have copies for Mr. Lauria

12   and Mr. Lerner, but one would hope that Your Honor would

13   consider it nonetheless, given the lateness of our difficulty

14   in getting it electronically filed.

15               THE COURT:    All right.

16               MS. BALL:    Thank you, Your Honor.     With that, Your

17   Honor, again I'd like to move on to the cash collateral motion.

18   Your Honor, I think there are two objections to that order.

19   There is a limited objection by the unsecured creditors

20   committee and that limited objection was very recently joined

21   by Timken.

22               As I understand the objection, it relates to if the

23   sale occurs what happens to the -- should Your Honor approve

24   the sale, what happens to the proceeds.

25               We also have the objection, Your Honor, of the Wayne
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1    County Treasurer which we believe we have resolved.         And

2    perhaps I should start with the resolved objection.

3               We have resolved with the Wayne County Treasurer and

4    amended the language in the proposed final cash collateral

5    order which was filed with the Court last evening such that

6    their objection, which was here that the adequate protection

7    liens might prime their statutory position.         We have amended

8    the order to make sure that is not the case and that their

9    rights and priority would be preserved.      I don't know if

10   someone's here from Wayne County, but I suspect there is, Your

11   Honor.

12              THE COURT:    Is there anyone here on the behalf of

13   Wayne County?

14              MR. RYDER:    Good morning, Your Honor, Herb Ryder of

15   Day Pitney representing the Wayne County Treasurer.         It is

16   correct.   So long as the previously negotiated language has

17   been put in the order then the objection has been resolved.

18              THE COURT:    All right.    Thank you.

19              MS. BALL:    Your Honor, we have an evidentiary point

20   perhaps before Mr. Mayer rises.       Mr. Cullen?    On this matter,

21   Your Honor.

22              MR. CULLEN:   Thomas Cullen representing Chrysler,

23   Your Honor.   If I may, we sent out a letter to the parties on

24   May 25th listing a number of documents which we wanted to move

25   into evidence without objection and without the Court taking
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1    the time to authenticate these documents as such.     We got no

2    objections to that until very early this morning.     We got an

3    objection from White & Case.    We've discussed the objection

4    from White & Case, and there are a few documents or a few

5    categories of documents with which we want to continue to

6    engage with them in order to get into evidence, or which we may

7    attempt to get into evidence by designating deposition excerpts

8    where they, where those documents were authenticated.

9               But with those emendations I would like to hand the

10   Court up this letter dated May 25th and indicate to the Court

11   that we received the agreement of White & Case with everything

12   except to the categories of 13, 14, 15 and 20 of that letter.

13   And we will either continue to engage with them or probably

14   seek or if -- if agreement is not possible we will try and seek

15   to put in probably a deposition authentication of those

16   documents to get them into evidence without the need for a live

17   witness.

18              MR. ZAKIA:   Your Honor, Jason Zakia of White & Case

19   for the Indiana Pensioners.    We're happy to continue to discuss

20   the issues to which we have not consented.     I would just note

21   we'd like to reserve our right to object to the debtors effort

22   to offer what, in our view, is expert opinion testimony through

23   deposition designation when the witness is clearly available

24   and could have been called by the debtors at the hearing.     But

25   we're happy to continue to discuss it with the debtors,
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1    reserving our rights.

2               MR. CULLEN:    If I could hand up to the Court the

3    document as marked and there are circles around the items that

4    are not, that are not agreed to.      Is that appropriate, Your

5    Honor?

6               THE COURT:    All right.   You can hand it up.   As an

7    administrative matter, could those boxes that are in front of

8    the air conditioning unit be moved?     And that would probably

9    also include the boxes and bags on top of the air conditioning

10   unit.    Just put them on the floor as I think whatever air we're

11   receiving is being hampered by them.

12              MS. BALL:    If Your Honor would turn in that letter to

13   item 12, those items, Your Honor, are relevant to our request

14   that Your Honor enter a final cash collateral order.

15              Your Honor, these documents were also provided to the

16   creditors' committee and I would particularly draw your

17   attention to items H, I, J and K, which Your Honor are the

18   perfection documents -- well, actually, all of them, F through

19   K, which, Your Honor, just as a matter of diligence, we wanted

20   to share with the Court that that is the background for our

21   coming to Your Honor to ask for entry of the final cash

22   collateral order.

23              The form of order that we filed last evening is

24   substantially the same as the interim order.      In particular,

25   Your Honor, paragraph 6(c) of the proposed final order, as well
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1    as adopts the provision of paragraph 6(c) of Your Honor's

2    interim order which has the effect of upon close should Your

3    Honor approve the sale, should we close the sale, the lenders'

4    liens would attach to the proceeds of the sale, notably, the

5    two billion in cash, Your Honor, and it would provide that as

6    the adequate protection with those lenders those monies would

7    be distributed.   We, the company, are satisfied with respect to

8    their liens and this enforcement action as an appropriate

9    resolution, and, therefore, have proposed that in the final

10   cash collateral order.

11            I would also, although we have not filed a specific

12   pleading, Your Honor -- yesterday at noon as an exhibit to the

13   reply we filed in support of the sale motion, Your Honor, we

14   also annexed a modified proposed order approving the sale, and

15   I would only want to point out Your Honor that in that proposed

16   sale order, we have provided in paragraph (x) with respect to a

17   finding regarding the appropriateness of the transfer of the

18   purchase assets and the collateral trustee's liens attaching to

19   the cash proceeds that Your Honor recognize that.   And then,

20   Your Honor, again in paragraph 10 we have put implementing

21   language -- suggested implementing language into our proposed

22   order reinforcing that those liens will attach to the cash

23   proceeds and the cash proceeds will go to the agent and the

24   agent will distribute for the benefit of the secured lenders.

25            Your Honor, with that I would yield to my colleagues
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1    and their limited objection.

2             THE COURT:    Thank you.

3             MR. MAYER:    Your Honor, Thomas Mores Mayer for Kramer

4    Levin, the counsel designate for the official committee of

5    unsecured creditors.   We filed a limited objection because at

6    the time we filed it we really did not understand and, based on

7    the debtors' original moving papers, we did not understand that

8    the immediate and indefeasible distribution of proceeds was, in

9    fact, a condition to the larger deal if indeed it is.    The

10   language that is new in this document relates to a first

11   priority consent.   We've asked for copies of that consent.      We

12   haven't received it.

13            The status of our review of the banks' collateral is

14   such that although I can stand here today and say that the

15   banks have perfected all of their liens and personal property,

16   as far as we know, I believe there are thirty-seven pieces of

17   real property.   Of the thirty-seven pieces of real property we

18   have twenty-nine mortgages that show that they've been

19   perfected.   There is one mortgage nobody can find, and there

20   are seven mortgages whose descriptions are so archaic that it's

21   not possible to match them up with the street addresses by

22   which these plants are now named.

23            This can be done.     It requires a title company or a

24   surveying firm to go out and actually do the work.    But in the

25   time that's been provided for us to sign off on the banks' --
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1    perfection of the bank's collateral, we simply haven't been

2    able to do it.

3                My suggestion, if I may, is that we've been in

4    discussion with many parties around this room and arguing over

5    the immediate and indefeasible payment of proceeds.        If we can

6    push that to the back of the agenda today until we decide

7    whether there are, in fact, proceeds to indefeasibly pay, it

8    would, I think, facilitate matters quite some because it is

9    possible that we can resolve our issues.     I'm prepared -- I

10   would ask the Court to push it to the back of the agenda, if

11   possible.

12               THE COURT:   All right.   The agent bank?

13               MR. PANTALEO:   Thank you, Your Honor.      Peter

14   Pantaleo, Simpson Thacher.    First of all, I'm going to keep my

15   remarks short because I'm happy to defer this to the end of the

16   agenda.   But I do want to make one particular point so that

17   Your Honor appreciates this, that, you know, before the company

18   went into bankruptcy and agreement was reached and Your Honor

19   has heard a lot about it.    It's an agreement with respect to

20   the terms under which the required lenders would consent to the

21   sale of a collateral in a bankruptcy proceeding.

22               And there were really basically two fundamental

23   aspects of it, both of which had economic significance.         One

24   was price; second was timing.    And this is the timing part.

25   And it's been an important aspect of the consent by the lenders
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1    from the start.    It was the basis of the agreement with both

2    the company and with the government.     And, frankly, it's the

3    only basis upon which I could stand up, as I have previously,

4    and say that we've got consent to the sale from the collateral

5    agent.

6                Absent this aspect of the transaction then we don't

7    have required lender consent and, as a result, you know, we

8    don't have the ability to say that we satisfy (f)(2).        We avoid

9    issues of credit bidding, we avoid obviously the need to

10   address the term -- the issues concerning whether in fact

11   people who dissent are bound by the determination to consent,

12   all those issues have to go out the window, you know, absent

13   adhering to the deal that had been struck.

14               Having said that, I'm happy to wait until the end of

15   the calendar to have whatever further discussions need to have.

16   But I just wanted to make certain Your Honor appreciated that.

17   Thank you, Your Honor.

18               THE COURT:   All right.   Thank you.    I will adjourn it

19   then until later in the calendar, either today, tonight or

20   tomorrow.

21               MS. BALL:    Thank you, Your Honor.    I think we have

22   another matter on the agenda that does not relate to the sale,

23   and I would yield to my colleague, Mr. Mayer.        The matter

24   before Your Honor this morning is retention of Kramer Levin.

25               MR. MAYER:   We want to thank the U.S. trustee for its
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1    expedited consideration of our papers.     I think, but I'm

2    prepared to be corrected, I can represent that nothing that is

3    before the Court today requires these conflict counsel based on

4    the disclosures that we've made to the U.S. trustee's office.

5    If the U.S. trustee is satisfied, we would ask that the Court

6    enter the order.   If the U.S. trustee needs more time, we're

7    happy to give the U.S. trustee more time.

8             THE COURT:     All right.   U.S. trustee's office?

9             MR. MASUMOTO:     Your Honor, we have no objection to

10   the retention at this time.

11            THE COURT:     All right.   Thank you.

12            MR. MAYER:     Thank you, Your Honor.

13            THE COURT:     Anyone else want to be heard?   No further

14   comment being heard I will grant the relief as requested, you

15   may submit the order.

16            MR. MAYER:     Thank you, Your Honor.

17            THE COURT:     Thank you.   All right.   As you rise then

18   to call your first witness?

19            MS. BALL:    Yes, Your Honor.   I was just going to hand

20   our opening statement to Mr. Lauria, but Your Honor, I would

21   yield to my colleague, Mr. Cullen to present the debtors' case

22   in support of the sale.

23            MR. CULLEN:     Corinne, did you get a copy?

24            MR. KURTZ:     Your Honor, I'd just start by asking for

25   a sequestration order and a confirmation from the debtor to the
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                            CHRYSLER LLC, et al.

1    extent Your Honor grants that the witnesses are not in the

2    room.

3             THE COURT:    All right. I'll let counsel get to the

4    podium first.

5             MR. CULLEN:    Yes.   Yes, Your Honor.   Assuming that

6    the motion would be made and granted as had been done

7    previously, I only have the first witness of the day in the

8    room which is Mr. Robert Manzo.

9             THE COURT:    All right.   Mr. Manzo?    As he approaches

10   the witness stand, again, right now it's -- 623 is available.

11   It's far more comfortable than this room.     Please avail

12   yourselves of it if you care to.

13            MR. MANZO:    Good morning, Your Honor.

14        (Witness duly sworn)



17   Q.   Good morning, Mr. Manzo.

18   A.   Good morning.

19   Q.   Are you the same Robert Manzo who submitted an April 30th

20   declaration to this Court?

21   A.   I am.

22   Q.   And a May 3rd supplemental declaration?

23   A.   That's correct.

24   Q.   And an expert report dated May 20th and filed May 21st,

25   2009 in this proceeding?
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                            CHRYSLER LLC, et al.

1    A.   That's correct.

2    Q.   And are you the same Robert Manzo who, finally, has filed

3    a May 26th, 2009 declaration of Robert Manzo?

4    A.   That's correct.

5    Q.   Now, with respect to the -- and the same Robert Manzo who

6    testified in this court on May the 5th?

7    A.   Yes.

8    Q.   With respect to the May 26th declaration and the May 21st

9    expert report, are they both true and correct to the best of

10   your knowledge and belief?

11   A.   They are.

12   Q.   If I may ask you just a couple of questions with respect

13   to those -- that additional work and those additional reports,

14   what occasioned the new liquidation analysis which you did on

15   May the 20th and submitted on May the 21st?

16   A.   There were several facts that changed from the date on

17   which that first analysis was done.    That was based upon the

18   company's balance sheet as of September 30th.   And it was

19   concluded it made sense to update analysis through March 31st

20   of 2009.    Additionally, we received updated profit and loss

21   information from the company regarding several of its

22   automotive product lines.    That information was relevant in

23   that it resulted in, in my opinion, in a reduction of various

24   values that I had assigned to various car lines that were

25   included in the liquidation analysis.
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                              CHRYSLER LLC, et al.

1         That information was based upon actual full year

2    information being available in early 2009 as compared to

3    projected information that was only available when we did the

4    initial analysis at the end of the fourth quarter of 2008.

5    Q.   Can you identify for the Court the main differences

6    between your January 30th liquidation analysis previously

7    submitted and your new May 20th liquidation analysis?

8    A.   There are three major differences, the first one being the

9    change in cash.     Cash decreased in the two analyses by

10   approximately 930 million dollars over that six month time

11   period between when the two analyses were done.     Additionally,

12   car inventory, that is, brand new cars that the debtor had in

13   its possession to sell, also decreased in terms of the number

14   of cars.     That is, they sold cars in that intervening six-month

15   time period.     That resulted in a further reduction in the

16   available asset proceeds in the second liquidation analysis

17   that was done as of March 31st.

18        And the third major area had to do with two of the car

19   lines which I indicated earlier were not profitable for full

20   year 2008.    And that resulted in us changing the going concern

21   value for those particular lines from going concern value to

22   liquidation value resulting in a far lower value of asset

23   sales.

24   Q.   Why did you choose to use the earnings in 2008 as the

25   basis for the car line valuation as opposed to, say, a period
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                           CHRYSLER LLC, et al.

1    of several years?

2    A.   We had reviewed financial information for various car

3    lines, going back to 2005, as far back as that.   We decided it

4    was more appropriate to use 2008's results because there has

5    been a dramatic change in the volume of car sales from 2005 to

6    the running rate at the end of 2008.   And, in our opinion, the

7    average analysis that one might use of historical information

8    for those three years would not at all be indicative of

9    potential going concern value in the current market, in the OEM

10   market for U.S. automotive manufacturers.

11   Q.   With respect to your reference to the current market for

12   U.S. automotive OEM manufacturers, did you have occasion to

13   consider the state of that market in doing your liquidation

14   analysis?

15   A.   Yes, we certainly did.

16   Q.   And what, what was the result of that consideration?

17   A.   The analysis that we had reviewed was from various public

18   sources of information with respect to projection of OEM U.S.

19   domestic manufactured car sales on a prospective basis.     That

20   information is forecasted by a variety of third parties, and is

21   commonly referred to as the SAR level, seasonally annually

22   adjusted rate of sales.   That adjusted rate of sales which is

23   U.S. car production volume in millions of units went from

24   seventeen to eighteen million range in 2007 and in the

25   beginning of 2008 down to now a range of approximately 9 to 9.5
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                             CHRYSLER LLC, et al.

1    million units per year, a drop of over forty to forty-five

2    percent in volume.

3    Q.   And what impact did that forty to forty-five percent drop

4    in volume have on your liquidation analysis?

5    A.   It resulted in several of the lines that we had valued as

6    a going concern being reduced because in our view the go

7    forward earnings stream would not substantiate a going concern

8    valuation at those dramatically reduced car levels that are

9    expected in 2009 and beyond.

10   Q.   Can you give me the bottom line?   What was the net present

11   value of the liquidation analysis that you were looking at on

12   May 20th as opposed to your January 30th analysis which you

13   previously testified?

14   A.   I believe, I don't have it in front of me, but I believe

15   it's been previously filed, the net present value for the one

16   most recently done is approximately 1.2 billion dollars of net

17   present value.   That's in the high-case scenario.   That is, in

18   our view, the absolute best case scenario of what a liquidation

19   value would be based on the current economics.

20        I would add one thing to that amount, that amount included

21   approximately 407 million dollars of cash.     In that

22   calculation, I would note that based upon the Court's order

23   with respect to use of cash collateral, the company during the

24   pendency of the proceeding has used that 407 million dollars.

25   And with respect to a liquidation if it were to occur now, that
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                            CHRYSLER LLC, et al.

1    407 would not be available for recovery to the first lien

2    lenders.   It would cause to, the range that I gave of 1.2

3    million, to be reduced dollar for dollar by the 407 million.

4    So in the high-case range -- I believe it would be more

5    approximate to say the high place range would be approximately

6    800 million dollars on a net present value basis.

7    Q.   Now in the course of your liquidation analysis work, was

8    there any direction by Chrysler to you as to where they

9    expected where they wanted you to come out?

10   A.   No, absolutely not.

11   Q.   Did they place any limitations on the nature or the

12   sources of your analysis?

13   A.   Absolutely not.

14   Q.   Same question with respect to the U.S. government or the

15   car task force, did they tell you at any time where they wanted

16   your liquidation analysis to come out?

17   A.   No.   In fact, I never spoke to them about the liquidation

18   analysis until it had been completed.

19   Q.   Did they put any pressure on you with respect to any

20   aspect of your liquidation analysis?    They being the U.S.

21   government or the U.S. Treasury task force.

22   A.   No, as I indicated I never spoke to them about the

23   liquidation analysis until after it was completed and

24   submitted.

25   Q.   Now, in terms of the restructuring process, did you at any
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                            CHRYSLER LLC, et al.

1    time exert any effort on behalf of the first lienholders?

2    A.   I'm sorry.   Can you rephrase that?

3    Q.   Did you at any time exercise any effort on behalf of the

4    first lienholders, for instance, trying to get them more money

5    from the government.

6    A.   We were involved, I testified to last time, in producing a

7    term sheet that was given by the company to the first lien

8    lenders in the beginning of February of 2009.    That had a

9    proposal from the company, and we attempted to negotiate with

10   that proposal with the first lien lenders.    They did not engage

11   in negotiation with the company.

12        At the end of April we understood that there were direct

13   discussions ongoing between the first lien lenders and

14   representatives of the automotive task force.   The company and

15   Capstone, my firm, were not involved in that negotiation.

16   However, I was told by representatives of the automotive task

17   force several days before the filing date that in fact

18   negotiations were under way and there was a bid and an ask

19   being offered by both parties.

20        To that end I was informed the night before the filing

21   that parties were close and that they were a bit apart, the

22   exact amount was never quantified to me, but that they were

23   close.   I offered on behalf of the company to attempt to look

24   for different ways that we, the company, could produce

25   incremental value that would be offered up to the first lien
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                             CHRYSLER LLC, et al.

1    lenders in an effort to bridge the gap between the different

2    positions and to avoid a Chapter 11 filing.

3         That was voiced to both parties, however, we were not

4    called upon to attempt to quantify or attempt to try to bridge

5    that gap by involving ourselves in the negotiation.

6    Q.   The last time you were in front of this Court, Mr. Manzo,

7    you gave some testimony about your knowledge of existence of

8    additional interest in the company or the company's assets.       Do

9    you recall that testimony, sir?

10   A.   I do.

11   Q.   Now since that time have any other bidders for the

12   company, or substantial parts of its assets, come forward to

13   your knowledge?

14   A.   We have had inquiries from several parties subsequent to

15   when I testified.    In my opinion none of them conform to the

16   bidding procedures and requirements set forth by the Court.       We

17   have documented those.    We have spoken to those interested

18   parties, provided them with information, referred them to the

19   bidding procedures, attempted to walk them through ways in

20   which they could express their interest in a more formal way.

21        One offer was received for materially less than the

22   company in total.    We have had discussions with that

23   prospective party.   But the other parties who expressed

24   interest in the company in its entirety never presented a

25   proposal and were merely phone discussions where we attempted
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                            CHRYSLER LLC, et al.

1    to solicit bids but none were forthcoming.

2    Q.   The one party that went beyond the phone discussion, could

3    you describe that for us, please?

4    A.   There's a party named Benstar Saturn, who expressed an

5    interest in a number of the Chrysler assets far less than what

6    I would consider to be materially all of the Chrysler assets,

7    as proposed in the Fiat alliance proposal.

8         That proposal called for no cash payments at closing.        In

9    fact, it required that the new entity to be formed would be

10   able to receive a cash payment from some source of 359 million

11   dollars to assist them in the organization of creating an

12   entity to purchase Chrysler.   The consideration that they

13   offered to pay was in the form of a note, which could be

14   converted into preferred stock.     Terms and conditions are --

15   were not graphically discussed in detail.     Approximately --

16   approximate value around 850 million dollars, and no further

17   inquiry was received from Benstar once we had a discussion with

18   them.

19            MR. CULLEN:   That's all I have, Your Honor.

20            THE COURT:    All right.    Thank you.   I was trying to

21   signal you to speak closer to the microphone, but I was a

22   little late.

23            MR. CULLEN:   Would you like me to provide him with

24   his declarations?

25            MR. KURTZ:    I don't think so.    Your Honor --
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                               CHRYSLER LLC, et al.

1                MR. CULLEN:    Yes.   Your Honor, could I move into the

2    evidence the new expert report and the new declarations?

3                MR. KURTZ:    We object as hearsay, Your Honor.

4                THE COURT:    What's the objection?

5                MR. KURTZ:    Hearsay, Your Honor.     It's an out-of-

6    court statement being used for the truth of the matters

7    asserted.    They have a witness on the stand.       He can testify.

8    I don't believe he's entitled to put in a document.         Expert

9    reports traditionally are not admissible.         They're simply a

10   notice document so that others are entitled to some notice of

11   what's coming in testimony.       Declarations at trial, are not

12   admissible.    That's why we have witnesses.       That's the

13   objection, Judge.

14         THE COURT:   All right.     Counsel?

15               MR. CULLEN:   Your Honor, I believe that we have

16   provided notice of the witness's testimony.        We could go

17   through the formality of -- I could lead him through the

18   report, paragraph by paragraph.        I could ask him to reaffirm it

19   paragraph by paragraph in terms of in sum.        But I don't think

20   that it would either advance the process or would it materially

21   aid the cross-examiner in going forward.        It would merely delay

22   it.

23               THE COURT:    All right.   When was this made available?

24               MR. CULLEN:   May 21st, the expert report was made

25   available.
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                              CHRYSLER LLC, et al.

1                THE COURT:   All right.   Mr. Kurtz?

2                MR. KURTZ:   Judge, firstly, I think the declaration

3    we received some time after midnight last night.      I'm not aware

4    that ease is a basis for ignoring the Federal Rules of

5    Evidence.    And to the extent that counsel really did try to put

6    a written document in front of the witness and ask him to

7    effectively read into the record, I would object on the grounds

8    that that was leading.

9                THE COURT:   All right.   I'll overrule the objection

10   and admit it into evidence and consistent with the rules the

11   Court established for written declarations and their

12   submissions and their use.

13   (Mr. Manzo's new export report and supplemental declaration

14   were hereby received into evidence as of this date.)

15               MR. KURTZ:   Your Honor, we've had some difficulty,

16   apparently, in getting documents into the court today.      I don't

17   know why security was -- is full.     I don't know if it's just

18   for this proceeding or there's other important proceedings

19   going on today.    We are very close to having together the

20   exhibits that I would use for with Mr. Manzo.      I would ask that

21   the debtors call their next witness, and that we recall Mr.

22   Manzo when I can walk him through exhibits, with copies for the

23   Court, and the other parties as well, not just copies for

24   myself.

25               THE COURT:   All right.   What do you mean by very
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                               CHRYSLER LLC, et al.

1    close, in terms of how much time do you need?

2               MR. KURTZ:    How much time will I need with Mr. Manzo?

3               THE COURT:    No.    How much time do you need to get the

4    documents together that you need to cross-examine Mr. Manzo?

5               MR. KURTZ:    About twenty to thirty minutes, Your

6    Honor.   Perhaps less.    It's outside of the courtroom where this

7    is going on.

8               MR. CULLEN:    Your Honor, may I suggest?    We have a --

9    there is a Daniel McElhinney who is the executive director of

10   Epiq Systems, who is the affiant on affidavits and service and

11   is here.   We could use the time to --

12              THE COURT:    All right.

13              MR. CULLEN:    -- get that done.

14              THE COURT:    The witness may step down to be recalled

15   shortly, and call your next witness.

16              MR. KURTZ:    Thank you, Your Honor.

17              THE WITNESS:    Thank you, Your Honor.

18              MR. CULLEN:    I'm going to ask you if you could

19   possibly stay here and wait.       Can Mr. Manzo remain during Mr.

20   McElhinney's testimony?        Just for ease.

21              MR. KURTZ:    What is the ease of having him here?

22              THE COURT:    All right.    Mr. Kurtz, let's not get

23   ridiculous.    He's testifying about whether notice was provided.

24              MS. BALL:    That's fine.

25              MR. KURTZ:    Okay.    I wasn't aware of what the --
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                               CHRYSLER LLC, et al.

1                THE COURT:   All right.

2                MR. KURTZ:   That's fine.

3                THE COURT:   I thought you heard what was being

4    proposed.   All right.     Mr. Manzo, you can stay.   What I have to

5    caution counsel about, especially since these proceedings are

6    being transmitted into other rooms, is that when you stand up,

7    and I think Mr. Kurtz, you're probably able -- you may be able

8    to be heard by that microphone on the edge of the table, but if

9    not, you're going to have to approach the podium.        So anyone

10   that's not near a microphone is not being picked up in the

11   transmission outside of this room.       So keep that in mind.

12               MR. KURTZ:   Your Honor, I know that I've been -- I'm

13   being cautioned several times that I'm being heard even when I

14   don't intend to be heard.

15               THE COURT:   Well, that's an issue that I will not

16   address.

17               MR. KURTZ:   I didn't mean by the Court, of course.

18               THE COURT:   Who's going to handle the witness for the

19   debtor?

20               MS. BALL:    I will, Your Honor.

21        (Pause)

22               THE CLERK:   Please raise your right hand.

23        (Witness duly sworn)

24               THE COURT:    All right.   Go ahead.

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                                CHRYSLER LLC, et al.

1    BY MS. BALL:

2    Q.   Mr. McElhinney, will you state your name for the record?

3    A.   Daniel C. McElhinney.

4    Q.   And by whom are you employed?

5    A.   Epiq Bankruptcy Solutions LLC.

6    Q.   And do they have a role in this proceeding?

7    A.   We are the court approved claims and noticing agent in

8    this matter.

9    Q.   In that capacity, have you been responsible for serving

10   various notices in connection with this case?

11   A.   We have.

12   Q.   Mr. McElhinney, I've prepared a chart.

13               MS. BALL:    Your Honor, may I approach to share --

14               THE COURT:   Yes, please.    Thank you.

15               MS. BALL:    Your Honor, I would like to --

16   BY MS. BALL:

17   Q.   Mr. McElhinney, take a moment to review the chart that

18   I've just handed to you.

19   A.   Yes.

20   Q.   It describes a series of notices and publications.      Are

21   you familiar with the notices and publications identified, the

22   notices and various publications identified on this chart?

23   A.   Yes, Your Honor.      I mean, sorry, Ms. Ball.

24               MS. BALL:    Not promoted.

25               THE WITNESS:    Sorry about that.
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                               CHRYSLER LLC, et al.

1                MS. BALL:    In particular, if Your Honor would turn to

2    the letter, which was submitted to Your Honor prior today,

3    dated May 25th, item 15, was one of those items that was not

4    resolved by agreement.

5    Q.   Mr. McElhinney, turning to page three of the chart, you

6    may see the portion of the chart that it the schedules of

7    designated agreements.      Do you see that?

8    A.   Yes.

9    Q.   If you were to look at the entries on the remainder of

10   page 3e and page 4, do they accurately reflect the notices

11   provided by Epiq in this case?

12   A.   They do.

13   Q.   And is that also true with the items listed on pages 5 and

14   6 of the chart?

15   A.   They do.

16               MS. BALL:    Your Honor, with that, I would ask that

17   the notices of assumption and assignment, and the related

18   schedules, all of which notice was given by Mr. McElhinney, as

19   they are identified in item 15 of the letter, dated May 25th,

20   be moved into the evidence of this hearing.

21               THE COURT:   Anyone else wish to be heard with respect

22   to this matter?    No response or otherwise an objection being

23   heard, I'll grant the relief, and they are so admitted.

24   (Notices of assumption and assignment and related schedules

25   dated 5/25/09 were hereby received into evidence as of this
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                              CHRYSLER LLC, et al.

1    date.)

2               MS. BALL:    Thank you, Your Honor.   Thank you, Mr.

3    McElhinney for your half a million notices.

4               THE COURT:    Mr. Kurtz, are your documents ready?     Why

5    don't we take --

6               MR. KURTZ:    No, they're not, Your Honor.

7               THE COURT:    All right.

8               MR. KURTZ:    Why don't we just move to the next

9    witness?

10              MR. CULLEN:   We can do it either way, Your Honor.     We

11   have the next witness available down the hall.     We can move

12   that witness -- we can move to the next witness if the Court

13   would prefer --

14              THE COURT:    Mr. Kurtz, do you have any idea how long

15   it's going to be now?     I mean, I can take a five minute break

16   if it's going to be five minutes, or I could take a ten minute

17   break.

18              MR. KURTZ:    Your Honor, I can endeavor to find out.

19   But, you know, the work is being done outside the courtroom and

20   I haven't left since we had the discussion.      I'm happy to find

21   out, though.

22              THE COURT:    All right.   Could you ask someone else to

23   find out then?    Mr. Cullen, how long will the direct testimony

24   of your next witness be?

25              MR. CULLEN:   Mr. Shumaker, my partner will be
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                            CHRYSLER LLC, et al.

1    handling --

2             MR. SHUMAKER:   Probably fifteen minutes, Your Honor.

3             THE COURT:   And do you expect cross-examination of

4    the next witness?

5             MR. KURTZ:   Who is the next witness?

6             MR. SHUMAKER:   Mr. LaSorda.

7             MR. KURTZ:   Yes.

8             THE COURT:   All right.   Let's get an update first.

9         (Pause)

10            THE COURT:   All right.   It appears that we're going

11   to have to take a technical break anyway to adjust the

12   microphones.   So we will recess -- stand in recess until at

13   least 11:30 until we straighten out the microphone issue, and

14   maybe at that time, we'll be ready to proceed with Mr. Manzo.

15            MR. KURTZ:   Thank you, Your Honor.

16            THE COURT:   All right.   Thank you.

17        (Recess from 11:16 a.m. until 11:35 a.m.)

18            THE CLERK:   Please be seated.

19            THE COURT:   All right.   Mr. Kurtz?

20            MR. KURTZ:   I'm sorry.   Your Honor --

21            THE COURT:   What I suggest you do is, the sound needs

22   to get picked up by that microphone at the edge of the table.

23   So if you move some of the papers away from it and move the

24   microphone closer, it may be helpful.

25            MR. KURTZ:   We'll do that, thank you, Your Honor.      We
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                              CHRYSLER LLC, et al.

1    apparently had to leave the courthouse and go to a Kinko's to

2    make copies of the one-page document.       They are not back yet

3    from that exercise.     I have only two copies of the other

4    documents which would not need a copy for Your Honor.      So we

5    are still working diligently to get those exhibits ready.      And

6    I would ask that we simply, if possible, move to a different

7    witness, Judge.

8               THE COURT:   All right.   But in the future, bring it

9    to the Court's attention because, as you may recall, at one of

10   the prior hearings, the Court made copies.       So try to tell your

11   staff --

12              MR. KURTZ:   I recall well, Your Honor.

13              THE COURT:   -- that's doing this they may not

14   necessarily have to leave the courthouse to get something like

15   that done.

16              MR. KURTZ:    I do recall that, Your Honor, and

17   apparently we did ask chambers and they wouldn't make the copy

18   for us.    But I did not ask myself and perhaps I could've made

19   clearer the urgency if I had done so.

20              THE COURT:   Yes.   Thank you.

21              MS. BALL:    Your Honor, in the interim, I have been

22   asked to bring to your attention, and I was looking in the

23   courtroom, our agenda letter apparently neglected to include

24   the save and support of the UAW, and the representative of the

25   retirees in the English Settlement, and they had asked to
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                              CHRYSLER LLC, et al.

1    address the Court.    I thought we might be able to use this

2    time, if they're here.

3             I see Ms. Ceccotti is here, Your Honor.       She wanted

4    to bring that to your attention.    And if we need some moments,

5    would this be a good use of our time?

6             THE COURT:    All right.

7        (Pause)

8             THE COURT:    Is someone coming forward?

9             MS. BALL:    I am, Your Honor.

10        (Pause)

11            MS. CECCOTTI:     Good morning, Your Honor.    We did

12   notice that the amended agenda letter did not include a number

13   of filings related to the UAW, so I did want the Court to be

14   aware of them.   There was a notice of filing that listed them,

15   and that is docket number 2080.     There is also a response of

16   the UAW to objections to the debtors' motion for an order

17   authorizing the sale of substantially all the debtors'

18   operating assets and other relief.     And that is at docket

19   number 2085.

20            We have, in addition, a supplemental statement of the

21   UAW in support of the sale motion, and responses to individual

22   retiree statements.    And those statements were filed concerning

23   the approval of the retiree settlement agreement.      And that is

24   at docket number 2094.

25            We also have a declaration of David Curson,
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1    C-U-R-S-O-N.   Mr. Curson will be the UAW's witness today.      And

2    that is at docket number 2101.    And in addition, I would like

3    to call the Court's attention to docket number 2113, the

4    joinder of class representatives and this -- known as the

5    English class, and their joinder relates to docket number 2094,

6    the supplemental statement in support of the UAW, in support of

7    the sale motion and the responses to the individual retiree

8    statements.

9             Your Honor, I believe that that is the housekeeping

10   matter that I wanted to make sure that we addressed.       I think

11   in terms of any further substantive statement on the retiree

12   settlement, I would suggest that we wait --

13            THE COURT:    Oh, we will.

14            MS. CECCOTTI:   Yes, thank you very much.

15            THE COURT:    I have seen all the documents you

16   referenced.

17            MS. CECCOTTI:    Okay.

18            THE COURT:    They may not have made it on the agenda

19   but I did see them this morning.

20            MS. CECCOTTI:    Thank you, Your Honor.

21            THE COURT:    All right.     Thank you.   All right.   The

22   debtor may proceed with its next witness.

23            MR. CULLEN:    We'll take Mr. Manzo down the hall.

24        (Pause)

25            MR. SHUMAKER:   Your Honor, this is Gregory Shumaker
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1    of Jones Day for the debtors.    And the debtors are calling Mr.

2    Tom LaSorda to the stand.

3             THE COURT:    All right.

4             MR. SHUMAKER:     And he is on his way down the hall.

5             THE COURT:    At least a side note, Mr. Kurtz, I don't

6    know where your staff person went, but apparently, according to

7    my chambers, they didn't go in there to seek a copy.    So they

8    may have gone to some other office.

9             MR. KURTZ:    Okay.    Thank you, Judge.

10            THE COURT:    Just bring it to my attention if it

11   occurs again, all right?

12            MR. KURTZ:    Thank you, Your Honor.

13            THE COURT:    Thank you.

14            THE CLERK:    Would you raise your right hand.

15        (Witness duly sworn)

16            THE COURT:    All right.   Go ahead.



19   Q.   Good morning, sir.    Could you state your name for the

20   record, please?

21   A.   Thomas LaSorda.

22   Q.   Mr. LaSorda, could you provide the Court with a summary of

23   your professional background?

24   A.   Sure.   I'd be happy to.   I've been in the business about

25   thirty-two years, nine years with Chrysler, twenty-three with
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1    General Motors.    Started as a union relations rep with GM in

2    Oshawa, and moved up through manufacturing and other posts.         At

3    Chrysler, I was the head of power train manufacturing and

4    executive vice-president of manufacturing, and then the chief

5    operating officer.      Then I was a CEO at Chrysler for two years

6    from September of '05 through August of '07.

7    Q.   And then what happened in August of '07?

8    A.   Oh, after that, I became -- sorry.     Cerberus' Bob Nardelli

9    came in and they asked me to stay around and help out, and I

10   was glad I did.   And I became the vice-chairman and president

11   of Chrysler.

12   Q.   And is it fair to say you consider yourself a car guy?

13   A.   Very much so, yes.

14   Q.   Now, Mr. LaSorda, you indicated you joined Chrysler in

15   2000, correct?

16   A.   Correct.    May of 2000.

17   Q.   Did there come a time when you believed that the company

18   had strategic weaknesses?

19   A.   Yes.   It was prior to Cerberus purchasing Chrysler.      In

20   fact, it was in the fall of '06 that I actually presented to --

21   Q.   I'm sorry, Mr. LaSorda.     If you could move the mic closer

22   to you --

23   A.   Closer?    Sure.

24   Q.   I think we're having some difficulty hearing.

25   A.   Is that better?     All right.   Yeah, when -- prior to
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1    Cerberus actually purchasing Chrysler, it was in the fall of

2    2006, that I presented to the board of managers at Daimler-

3    Chrysler that Chrysler really needed to pursue a strategic

4    partner around the world, and certainly get sanction to go

5    investigate that, do the analysis around the world on the best

6    players and conducted that and kept that position right on

7    through to what we have today which is a great potential

8    partner here in Fiat.

9    Q.   I'm sorry.    And you said you indicated to Cerberus what?

10   A.   That Cerberus purchase the company.    They were in the

11   bidding process.    We actually gave an overview of Chrysler and

12   what our plans were and Cerberus actually were bidding on the

13   company.   And in May of 2000 -- excuse me, May of 2007, they

14   were awarded as the winning bid and closed in August.      At that

15   point in time, I went to that new board of management and said

16   that what we really needed to do was find a -- continue our

17   efforts with a strategic partner.   And they endorsed that and

18   encouraged me to go seek out other partners around the world.

19   Q.   Why did you believe that Chrysler required a strategic

20   partner?

21   A.   Well, if you looked at us, ninety percent of the Chrysler

22   enterprise, both in manufacturing and sales, was in the NAFTA

23   Region.    In this global enterprise of sales, which goes into

24   the tens of millions of units, really were in Europe, Asia,

25   and, of course, India, and South America.      We didn't have any
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1    presence there in manufacturing, and in order to grow, based on

2    the huge duties that took place in these regions, you have to

3    actually build there.   And they all were primarily focused on

4    small cars where Chrysler did not have a small car portfolio.

5    And that's where the big reach was.   So we needed a partner

6    that could provide that.   And that was the biggest issue that

7    we needed.

8    Q.   Okay.   Were there any issues with scale?

9    A.   Well, Chrysler's scale of two million units a year or so

10   against the big players, like Toyota, at about nine to ten

11   million, and, of course, a lot of the Europeans having

12   interfaces were huge too, like Volkswagen.     The only way for us

13   to get the leverage on capital leverage, on manufacturing

14   leverage, on cost leverage was to go with somebody else, to

15   take that scale, combine it, then obviously have a much

16   competitive -- a better competitive company.

17   Q.   So after you identified these weaknesses for Cerberus,

18   what did the company do to address them?

19   A.   Well, one of the big things that we did was, first of all,

20   since it was my idea, they said, well, you go lead this.     So we

21   set up a group that I -- that we had with global acquisition

22   activity and global operations.   And what we tried to do is set

23   up -- we took one of our brightest young players, by the name

24   of Scott Garberding, and he worked with me.     And we went around

25   the world almost, because my family didn't see me for about two
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1    years -- is to go around to find the best players.   And we set

2    up a separate group, we brought in the best technical talent

3    internally, and set up a separate organization that was

4    responsible to try to find out and seek out partners around the

5    world.

6    Q.   What would you do on an individual basis, you said, travel

7    around the world, in order to find potential alliance

8    candidates?

9    A.   Well, it wasn't like they were all lined up, you know,

10   knocking on your door that they wanted to be a partner.

11   Obviously, this whole business is about relationship building.

12   And I knew a lot of people in the business, and you need to

13   start with products.    What product sharing opportunities are

14   available, and most companies were interested in doing stuff

15   like that.

16        For example, Chrysler has a great history with trucks and

17   minivans and SUVs as well as other products.    But people sought

18   out certain platforms that we may be interested in and they had

19   small cars.    So we were looking at what kind of an exchange

20   could we do.    And we call it a product OEM exchange.

21        So being known in the industry, I had the access to at

22   least talk to some of the great CEOs around the country or

23   around the world, and asked to talk to them about potential

24   opportunities.    That's how it all starts.

25        From there, once you know you have a relationship between
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1    the two companies, they could then lead to a bigger potential

2    alliance.

3    Q.   So you weren't just looking for mergers.    You were also

4    looking at products?

5    A.   A merger is much too big of a discussion point at the

6    beginning of any discussion with any company.     First of all,

7    most aren't out there looking to merge.    They want to see a

8    need and a benefit.    And of course, what Chrysler offered is

9    greater more -- American presence, if you will, a North

10   American.   They offered us reach in the rest of the world.

11        So if they could work together -- this is all about

12   whether people can work together first.   And that was the test

13   with Nissan.   Can you work together first?    And that was the

14   test with Fiat as well.    And if you can -- I knew all the GM

15   folks so that was an easy transition to talk to them.    But

16   those were the three main players in my endeavors.

17   Q.   Could you share with us some of the CEOs that you visited

18   with during that time frame?

19   A.   Well, I've talked to a number of them.     From Mitsubishi,

20   Masuko San, and from General Motors, of course, Rick Wagoner.

21   I used to work for him years ago -- great guy.    And then I'd

22   met with Carlos Gome (ph) as well, met with the people from

23   Volkswagen, Mr. Ratan Tata at Tata Motors in India.    Met with

24   some of the top people, not the CEOs, at Hyundai, Kia, but I

25   met with them as well.    So, pretty much a lot of major players
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1    around the world.

2    Q.   And did you discuss possibly selling any platforms or

3    individual product lines in those discussions?

4    A.   Well, what we were after were small cars.     So our thrust

5    was, what kind of small cars might you have available that we

6    could put into our portfolio.   So that's how those discussions

7    came about.    And then, of course, they did not look to us for

8    our platforms at the beginning, but then sought those out

9    later, especially Nissan.

10        And so, we would go into Kia, for example, and ask them

11   for a small car.    Almost had a deal, but based on what was

12   going on in this marketplace, they pulled.    Tata was greatly

13   interested.    We wanted to sell our brand rights to work with

14   them, to have them sell and make jeeps in India.    They just

15   bought Land Rover and Jaguar and just launched a new car called

16   a Nano and expressed no interest to proceed with those

17   discussions.

18        I've been to China, and multiple times, looking at selling

19   specific assets, old assets to the Chinese.    We couldn't

20   consummate a deal based on the transaction that's take place

21   since December.

22   Q.   You mentioned the Jeep brand in your discussions with

23   Tata.   Is Tata in India, is that correct?

24   A.   Yes.   Yes, of course.

25   Q.   Are there any particular difficulties in trying to sell
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1    the Jeep brand?

2    A.   Well, first of all, Jeep -- in years ago was a separate

3    company under AMC.    But it's a fully integrated brand and

4    enterprise within Chrysler.    Let me explain what I mean by that

5    fully integrated.    In a Jeep plant, there's three products --

6    or excuse me, three of our four plants that make not only

7    Jeeps, they make Dodges' product in the same plant or Chrysler.

8         So for us to say, let's go sell Jeep, was just not

9    practical.    What would you do with the Dodges in those plants

10   or the Chryslers that were made?    What would you say to the

11   supply base if they didn't have a lot of product to be built in

12   those plants?     Suppliers go under.

13        So selling Jeep was a great, what I'll call, consultant

14   kind of theory approach to ideas.       It just wasn't practical for

15   us to even consider something like that.

16   Q.   Okay.

17   A.   -- although we did because I was asked to consider it.

18   Q.   At a certain point, I take it, there were discussions with

19   Fiat, is that correct?

20   A.   Yes.    It started in March of 2008.     We actually sold the

21   tri -- we sold assets, too, to generate cash along the way.

22   That was another part of my responsibility.       So we sold the

23   Tritech engine plant that was in Brazil.       It was a great engine

24   plant, but of course, we didn't have much use for it.       It was a

25   joint venture with BMW.    So we had that venture going, and we
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1    sold that plant to Fiat.      That's the first time that I met

2    Sergio Marchionne, the CEO of Fiat.

3    Q.   And when was that, Mr. LaSorda?

4    A.   March 12th.      You remember those dates in your career.

5    Some of you might remember dates like that.      He was just a

6    great charismatic guy.     He turned out to be another fellow

7    Italian and a fellow Canadian, too.      So we hit it off pretty

8    good.   And we talked about doing some particular products that

9    Fiat 500 was the first one that we referenced.     And from then

10   on, we did a lot of work together.

11   Q.   And March 12th of what year, Mr. LaSorda?

12   A.   Sorry.   2008.

13   Q.   Okay.    And did you make any sort of general assessment of

14   the desirability of Fiat as an alliance partner?

15   A.   Of course.    Back in -- like I referenced, back in December

16   of '06, when I went to Daimler, we had conducted a complete

17   analysis of about seven major players around the world.      And,

18   of course, we redid another analysis on Fiat.

19        First of all, what kind of product range did they have --

20   product platforms and technology, and engine technology.         This

21   is extremely valuable for any other OEM, is to get small

22   engines and small cars.      This is absolutely what you have to

23   look at.

24        We looked at their global reach, huge.      They're number one

25   in Brazil.    They were big in Europe.    They had eight percent of
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1    the market.    And, of course, we looked at -- how could we

2    combine them and save Chrysler a lot of capital and then expand

3    and grow as fast as possible.    This was a great enterprise, and

4    they had great brands too.    We couldn't get access to those,

5    like Ferrari or Maserati.    These are great staple brands that

6    are around the world, so -- great leadership and we thought we

7    could make it work.

8    Q.   And ultimately, you came to some type of agreement with

9    Fiat, is that correct?

10   A.   Yeah, Fiat sent us a term sheet.    We did a synergy study

11   between the companies.    It's very, very important to determine

12   before you embrace somebody that you actually look at what are

13   the synergies between the companies.    Global reach was one,

14   international sales, purchasing synergy so that you combine

15   things.   And obviously, what the manufacturing and what we

16   could do and saving capital was the added.

17        So we had completed that, of course, and -- that synergy

18   study, and they submitted a term sheet that kind of put the

19   framework together late December of '08, which led to where we

20   are today.

21   Q.   In that term sheet, what type of consideration was Fiat

22   providing to Chrysler?

23   A.   Well, when you look at a major player like that, they have

24   a lot of small car platforms which are extremely valuable to

25   Chrysler.    Most people don't realize that aren't in the
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1    business, that it costs you at least a billion three to even

2    more per platform to develop on your own.

3          So if we were to develop a platform that was a small car

4    like their Fiat 500, not only would we have to build the car

5    platform, that's the building, the structure of the car, we'd

6    actually have to then manufacture engines small enough to put

7    in those cars and transmissions small enough to put in those

8    cars as well.   So you're talking billions of dollars of

9    investment to actually compete with them.     So we needed a

10   partner to avoid that investment, and that's what we'd looked

11   at.

12         And like I said earlier, the global reach in sales.      We'd

13   actually look at what kind of capital we could save, and then

14   purchasing synergies would be huge as well.     So those were the

15   main things we would like with Fiat.

16   Q.    And you mentioned engine technology.    What type of engine

17   technology, if you could describe for us briefly?

18   A.    Well, when you get into small car engines, you'd look at

19   Fiat as -- in Europe, there's eight major brands in Europe.

20   They're the lowest Co2 emissions company in all of Europe.

21   That was very important, based on what was happening in the

22   United States and fuel economy standards with CAFE.     And if we

23   could couple a partnership with them, we could leapfrog the

24   competition by getting their products and their platform.

25         So if you take a small engine, of one two displacement,
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                                CHRYSLER LLC, et al.

1    which is pretty small --most of you drive probably much bigger

2    engines than that.       So you take those and they had multi-air

3    technology, which is really an advancement on fuel economy,

4    that they had developed over about eight to ten years.        And you

5    pick all that technology up in this kind of a venture, which

6    would cost you hundreds of millions and years to develop on

7    your own.

8    Q.   Okay.

9                MR. SHUMAKER:    Your Honor, may I approach the

10   witness, please?

11               THE COURT:    Yes.

12               MR. SHUMAKER:    Thank you.


14   Q.   Mr. LaSorda, I've handed you a document that is marked as

15   Debtor's Exhibit No. 25.         Do you recognize that?

16   A.   Yes.    This is my affidavit or declaration that I prepared.

17   Q.   Okay.    And are you -- you are familiar with it then?

18   A.   Absolutely.

19   Q.   Okay.    And could you tell the Court what the date is on

20   the last page?

21   A.   April 30th, 2009.

22   Q.   Do you have, as you sit here today, any modifications that

23   you would make to this declaration?

24   A.   There was one typing error on paragraph 23 that I found,

25   and it was my mistake.      I didn't -- it was the last sentence in
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1    paragraph 23.

2    Q.   Okay.    And that is on page ten; is that correct?

3    A.   Page ten.    Yeah.    Sorry.

4    Q.   And it's the last sentence?

5    A.   Of paragraph -- it's the first sentence on the -- on that

6    page.    It said, "Based on current data, Chrysler could achieve

7    an approximate eight percent share of European market, a 19

8    percent share of" -- that's the actual shares that Fiat had.

9    It should've said, "could achieve access to approximately eight

10   percent share."

11        In other words, they were big players in those regions, so

12   it was, for us -- the typo should've been, achieve access to

13   approximately eight percent.

14   Q.   Understood.

15   A.   But the rest of the document is accurate.

16   Q.   Okay.    So to the best of your knowledge, all of the

17   statements contained herein, within this Debtor's Exhibit

18   No. 25 are truthful and accurate to the best of your knowledge

19   and belief?

20   A.   That's correct.

21              MR. SHUMAKER:     Your witness.   Your Honor, we would

22   offer Debtor's Exhibit No. 25 into evidence.

23              THE COURT:     All right.   Does anyone else wish to be

24   heard?

25              MS. ASNER:     Your Honor, I'd like to cross at this
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1    point.

2               THE COURT:   Yes.   Come to the microphone, please.

3               MS. ASNER:   Your Honor, Karen Asner of White & Case

4    on behalf of the Indiana Pensioners.    I intend to cross, and

5    also object in the first instance to the declaration being

6    admitted into evidence.    The witness is here live and it's

7    hearsay.

8               MR. SHUMAKER:   Your Honor, we can review all this if

9    you'd like.

10              THE COURT:   No, but something seems to be a bit

11   confusing here.   We -- in a conference call, it was understood

12   if these declarations were made available they would be

13   admitted as direct, subject to modifications and additions.

14   And the issue was raised by counsel for Indiana Pension Fund,

15   that there may be an issue about how much time they have

16   available to review such documents.     But there was no issue

17   raised about whether or not we would proceed in this way.        So

18   it seems to me a little surprising, this is the second

19   objection I've heard from the Indiana Pensioners along this

20   line.

21              MR. KURTZ:   Your Honor, I wasn't aware that we were

22   waiving that right.     I had thought at the conclusion of

23   yesterday's telephonic conference, I had suggested that in

24   light of the fact that we weren't getting the notice that we

25   believed to be needed, that we would instead prefer that the
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1    witnesses be presented live --

2                THE COURT:   I don't think that's an accurate

3    statement, Mr. Kurtz.     It really isn't.

4                MR. KURTZ:   Judge, I --

5                THE COURT:   What you said -- you said, "Given no time

6    at all versus live testimony, I prefer live testimony."       And I

7    said, the issue of no time at all was your characterization,

8    not mine.    You will have ample time.

9                MR. KURTZ:   But, Your Honor, these declarations came

10   in after midnight.   I had tried to make clear on the call

11   yesterday that I didn't believe trying to read through

12   declarations --

13               THE COURT:   Well, you didn't succeed.    Objection is

14   overruled.    It's so admitted.

15   (Debtor's Exhibit 25, declarations, were hereby received into

16   evidence as of this date.)

17               THE COURT:   All right.    Proceed with your cross-

18   examination.

19               MS. ASNER:   Yes, Your Honor.


21   BY MS. ASNER:

22   Q.   Good morning, Mr. LaSorda.

23   A.   Good morning.

24   Q.   We met yesterday --

25   A.   Yes.
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1    Q.   -- at least via video, correct?

2    A.   Yes.

3    Q.   Okay.    Now, just so -- you recently retired from Chrysler

4    on April the 30th, correct?

5    A.   That's correct.

6    Q.   And in addition, to hopefully spending some time in your

7    retirement, you're currently acting as a consultant to Penske

8    Automotive; is that right?

9    A.   That's correct.

10   Q.   And you're helping them in connection with their publicly

11   announced interest in buying the Saturn platform from GM,

12   correct?

13   A.   No, no, no.    They're interested in the Saturn distribution

14   company, not in the platforms.

15   Q.   Okay.    And prior to that time, of your retirement, you

16   were the president and vice-chair of Chrysler?

17   A.   Correct.

18   Q.   Including while it was at Daimler-Chrysler, correct?

19   A.   I'm sorry?

20   Q.   Including while it was part of Daimler-Chrysler, correct?

21   A.   Well, Daimler owned -- from August of '07 owned 19.9

22   percent of Chrysler.

23   Q.   Right.    And you've been there for nine years.

24   A.   Correct.

25   Q.   And it became Chrysler LLC in August of 2007, when
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1    Cerberus did a buy-back transaction from Daimler, fair?

2    A.   Correct.

3    Q.   All right.    And prior to your retirement, you were also a

4    member of the managing board of Chrysler LLC, weren't you?

5    A.   Yes.

6    Q.   And you were also a member of the so-called Office of

7    Chairman of Chrysler, correct?

8    A.   Yes, I was.

9    Q.   And that was a group of four executives, who physically

10   sat near one another, and were the key executive team that

11   managed the business of Chrysler?

12   A.   That's right.

13   Q.   That included you, Mr. Nardelli, and Mr. Press and Mr.

14   Kolka?

15   A.   That was the four, yes.

16   Q.   And it's fair to say that the four of you kept each other

17   informed about key matters and strategic developments that were

18   important to the company, right?

19   A.   Yes, strategic areas especially.   Details, we were

20   responsible for our own areas.

21   Q.   And, in fact, you told me I think yesterday in the

22   deposition, that it was one of the most open management

23   environments you'd ever worked in, right?

24   A.   That's correct.

25   Q.   And you had access to the board when you needed it?
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1    A.   Access, yeah.     Absolutely.

2    Q.   And you reported to Bob Nardelli, the chairman, right?

3    A.   Yes.

4    Q.   And again, in this open environment, he generally kept you

5    apprised of key strategic and operational issues that he had

6    learned of, correct?

7    A.   Yeah.     I keep -- I keep coming back to when you're saying

8    operational, I don't know the definition you're using.     But at

9    a high level strategic discussions for sure.     Operational,

10   what's going on in all the plants, I was responsible with.       I

11   didn't get into any of those details with him.     Those are my

12   responsibilities and if I had a plant go down for a reason,

13   then I might tell him.     But daily, he would not be involved in

14   that, so.

15   Q.   But he would generally keep you apprised of key strategic

16   issues, or other developments he was working on, correct?

17   A.   Correct.

18   Q.   And I believe you also testified in your declaration and

19   also some on direct, that you -- one of your responsibilities

20   was in connection with mergers and acquisitions throughout your

21   time at Chrysler?

22   A.   Uh-huh.    Yes.

23   Q.   And that also included strategic alliances, right?

24   A.   Yes.

25   Q.   The sale of assets?
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1    A.   Sale of assets went through my area as well, yes.

2    Q.   And that would include a sale of individual platforms or

3    pieces of Chrysler, correct?

4    A.   Although we didn't sell any, we were selling assets that

5    were -- well, I'll say old assets, like I just mentioned the

6    Tritech Engine plant, or even assets of -- an old asset we did

7    sell from a Sebring plant, an old plant that we sold to Dodge.

8    Those things I would be responsible for, yes.

9    Q.   In the event you chose to sell a platform, for example,

10   that would've also been in your area of responsibility, though,

11   wouldn't it?

12   A.   Yes.

13   Q.   Okay.   And it was fair to say that you were in charge of

14   anything that related to that area, correct?

15   A.   Yes.

16   Q.   And again, if significant analysis had been prepared in

17   connection with a review of a potential purchase or sale of any

18   asset, you would've been made aware of it, correct?

19   A.   Yes.    Of the major stuff, absolutely.

20   Q.   And a lot of times those analyses were done in-house by

21   Chrysler people, right?

22   A.   Yes.    And sometimes, depending on their scale, like the

23   fact that we -- I'll give you another example, we're looking at

24   selling the Viper product and we use outside help, whether it

25   be Goldman or some other great institution that has that kind
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                             CHRYSLER LLC, et al.

1    of background.

2    Q.   And -- but it's fair to say that you believed you had a

3    very talented team of people within Chrysler to do these

4    analyses, right?

5    A.   Yes, and supplemented by others outside.    Correct.

6    Q.   And also supplemented, I think you told me, by people at

7    Cerberus, who had "great talent" in this regard, right?

8    A.   Yes.

9    Q.   And they, from time to time, would help you prepare

10   analysis, strategic analysis of potential M&A transactions,

11   right?

12   A.   Yeah.   They had expertise of doing multiple transactions

13   over the years, so we tapped into their management team.

14   Q.   Is it fair to --

15   A.   It's a separate group under Cerberus that we would use.

16   Q.   Okay.   Now -- all right.   I believe you also testified

17   about some of the efforts that you made when it became -- after

18   it became Chrysler LLC in August of 2007, some of the efforts

19   that you made, strategic efforts. to cut costs, correct?

20   A.   Yes.

21   Q.   And you implemented some pretty great results in that

22   regard, didn't you?

23   A.   Yeah, as a team.   It was the overall cost structure of the

24   company, based on where we forecasted the industry to go, that

25   we needed to actually cut some fixed costs and operating costs.
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1    That's typical of any company at any time based on the market.

2    Q.   And so it's fair to say that --

3                MS. ASNER:   Withdrawn.

4    Q.   So you forecasted, beginning in 2007, a market decline in

5    SAR, correct?

6    A    Well, what happened -- that was the strategic discussion

7    we had as a team, and the answer was, we thought in the future,

8    unfortunately we were right, however, in late 2008, no one

9    guessed the meltdown in the financial crisis around the world.

10   And then the market dropped to the lowest levels that I've ever

11   seen, and anybody else has seen in many, many decades.

12        So we forecasted our market that would shift down to about

13   fifteen and of course it went way, way down.

14   Q.   And since the August 2000 time frame you said, and even

15   possibly before that, you'd been taking your time and looking

16   for the right strategic partner, correct?

17   A.   Yes.    We were -- at that time in August, we had actually -

18   - were involved in discussions through the following August, if

19   you will, with Nissan, General Motors, as well as Fiat during

20   that period.    They all started at different times, but those

21   were the major, what I would consider to be major, players.

22   Q.   Okay.    And I think that you mentioned yesterday, but

23   correct me if I'm wrong, but the reason that the Nissan

24   strategic lines ultimately didn't go anywhere, because people

25   became strapped for cash toward the end of the year, right?
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                            CHRYSLER LLC, et al.

1    A.   Well, this is towards the end of 2008.   We had some very,

2    very good discussions with Nissan.   We actually had some

3    product exchanges going on.   And of course, Nissan had two

4    major enterprises.   It wasn't only Nissan, it was Renault.       And

5    based on the meltdown that was taking place around the world,

6    it just didn't affect the United States, it hit Europe real

7    hard, hit Japan, then went to South America, and then went back

8    over to China.   That's, in essence, how it went.   And it went

9    within months; this wasn't something that took a long time.

10        So based on their own financial crisis and, in fact, cash

11   situation, they had massive losses in both locations.     And they

12   said, look, at this point in time, we can't proceed with a

13   potential alliance with Chrysler.    So they walked away.

14        In fact, I asked them in January of '09, would Nissan

15   consider a term sheet to look at joining an alliance with

16   Chrysler, and we got word back, through Carlos Tavares, which

17   was obviously through Mr. Ghosn, that they could not proceed

18   and would not proceed based on the situation.

19   Q.   But Fiat, in connection with the proposed alignment, as

20   part of a transaction being considered here today, isn't

21   putting any cash into that partnership, are they?

22   A.   No.   We couldn't bring anybody to the alter to give us

23   five cents.   I mean, nobody would bring us a nickel.    I mean,

24   around the world, everybody was cash-strapped, and who was

25   going to put money into cash -- into Chrysler.   Nobody was.
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1         We were very, very fortunate that we got Fiat as a major

2    player based on their presence, their platforms, their

3    technology, and will help Chrysler come out of this very, very

4    strong, is my view.

5    Q    Well, let me step back, because I think I'm a little

6    confused.    I understand you to say Nissan walked away because

7    they didn't have cash to put into the venture.   You're

8    fortunate, you say, to have Fiat now in the venture, but they

9    didn't put in any cash.   So I guess my question to start is,

10   why didn't you go back to Nissan, when you saw the potential to

11   have a deal with no cash, and reopen the negotiation?

12   A.   Well, if you -- the history of the Nissan negotiations,

13   which I'm very, very familiar with because I led, at no time

14   would Nissan even in the fall of 2008, would they offer any

15   cash either.   And their term sheet that we talked to them, they

16   didn't want to offer us a nickel either.   So there was nobody

17   out there that was willing to provide any cash infusion.

18        However, what Fiat brought was just as good as cash, if

19   not better, with their platforms and their technology, and

20   small car engines, and things of that nature.    That was very

21   valuable to an auto company to get this kind of technology and

22   platforms.   This is very difficult to get around the world.

23   You just can't invent this yourself over night, so it was very

24   valuable to Chrysler.

25   Q.   But again, I'm sorry, I'm still a little bit confused.
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1    A.   Go ahead.

2    Q.   Nissan had exactly -- very similar, very valuable

3    technology, and you'd been engaged in lengthy discussions with

4    them, to gain access to that technology, correct?

5    A.   Yes.    But back again to your question, I cannot force

6    anybody to sign a deal with me.

7    Q.   Well, my question though --

8    A.   They knew about Chrysler.     We did the due diligence, we

9    actually -- we did a synergy study with them as well.    But I

10   can't force another auto company to sign a deal with me.

11   Q.   Well, you didn't force Fiat to sign a deal with you

12   either, did you?

13   A.   Fiat, in the discussions, was the only company that

14   submitted to us a term sheet.

15   Q.   Well, let me ask this, did you go --

16   A.   No one else did.

17   Q.   Sorry, I didn't mean to cut you off, sir.

18   A.   Go ahead.

19   Q.   Did you go back and ask Nissan to reopen negotiations --

20   A.   Yes.

21   Q    -- at that time?

22   A.   Fiat provided us, like I stated earlier, a term sheet and

23   I think the date was December the 28th or 29th, just before

24   Christmas.    In January I had approached Nissan and asked them,

25   are you interested in providing Chrysler a term sheet that we
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1    can consider.    And they called me back, and said, we've

2    reviewed it internally, and the answer is no, we will not

3    pursue.

4    Q.   But I thought you just testified that that was conditioned

5    on them providing some kind of cash as part of the deal,

6    correct?

7    A.   No.    The cash again, if I can go back to what I stated, in

8    the fall, in the discussions with Nissan, there was never a

9    proposal from them to provide cash.     They would not provide

10   cash.

11   Q.   Right.    But there's an understanding that that was part of

12   the deal, and that's why they ultimately didn't proceed, right?

13   A.   No, I told you, they didn't proceed because of their own

14   situation, both at Nissan and Renault.     That their leadership

15   team said they want to stay focused on where they are, and said

16   they would not pursue the venture.

17   Q.   Because they had no cash, correct?

18   A.   No, it was because of what was happening to them, and they

19   were draining cash like every other automaker around the world

20   and thought at that point in time, they would not pursue

21   Chrysler.     That's their decision.   I don't know what happened

22   in their board room with Mr. Ghosn and the rest of them, but

23   that was their decision.

24   Q.   Understood.    But did you go back in this time frame,

25   either after January or at any time, especially to even during
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1    this bankruptcy proceeding, this 30-day period, and ask Nissan,

2    if they would be willing to reopen the venture negotiations if

3    no cash infusion was required?

4                MR. SHUMAKER:    Objection, Your Honor, asked and

5    answered.

6                THE COURT:   No, I don't think it was answered.

7    Anyways, I don't think it was asked and answered before.        I

8    mean, a related question was, but I don't think this one was.

9    So go ahead.

10               MS. ASNER:   Thank you.

11               THE WITNESS:    Again, excuse me, the question if you

12   could?

13               MS. ASNER:   Could you read it back?

14               THE COURT:   Restate the question?

15   BY MS. ASNER:

16   Q.   Okay.    I'm asking you at any point in time, did you

17   yourself go back and ask Nissan from January till now,

18   including in this bankruptcy proceeding and ask them to reopen

19   negotiations, with the understanding that no cash infusion

20   would be required?

21   A.   Well, I had said that I did talk to them in January.       I

22   think it was the 12th to 14th period.      And of course, they came

23   back and said, we've reviewed, we're not interested.

24   Q.   I'm sorry, I must --

25   A.   And then you asked whether or not I asked during -- from
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1    April 30th, since it went into bankruptcy, whether I approached

2    them.   I'm no longer an employee, so I could not approach them.

3    Q.   Okay.   So you don't know anything that's happened in this

4    bankruptcy period, fair?

5    A.   Fair.

6    Q.   Okay.   Let's just focus -- I just want to be clear I've

7    got an answer to my question.    In the period of January until

8    you retired from the company, --

9    A.   Yes.

10   Q.   -- did you specifically tell Nissan that they could come

11   back and consider a proposal that required no cash?

12   A.   That was their proposal that they were providing us in

13   November.    It was the same proposal that they would've been --

14   had been referencing in January.

15        So back -- I just want to make sure that I'm clear.    When

16   they actually talked to us in November, they had a term sheet.

17   There was no cash.    So back in January, I said, are you guys

18   going to consider another term sheet, they knew it was no cash,

19   because that was what their last offer was, and they said "No,

20   they would not pursue it."

21   Q.   But back in the fall, cash was part of what Chrysler

22   wanted, correct?

23   A.   Of course.    But the situation just changed dramatically.

24   No one would offer us cash.    I've said that a number of times.

25   Nobody would.
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1    Q.   But Nissan was willing to offer you access to their

2    technology, correct?

3    A.   That was.    But of course, they didn't sign anything, and

4    we have no term sheet from them.

5    Q.   And it was the same type of technology that's being

6    provided by Fiat.    And in fact, you engaged in lengthy

7    discussions with them about that technology, correct?

8    A.   Well, Fiat had the A-car platform, which Renault and

9    Nissan did not.    They had advanced technology in small engines

10   for that car, which Renault and Nissan did not.     They were

11   looking at that kind of a platform to launch in 2012 or 13.       So

12   that platform was not available to us nor were those small

13   engines from both Renault or Nissan.

14        Our discussions were strictly with Nissan, not with

15   Renault.     We had no discussions with Renault.   We were asked to

16   just focus on Nissan at first.    If things went well, they would

17   look at an alliance -- we would be part of the Renault Nissan

18   alliance, but they wanted us to focus on the synergies with

19   just us and Nissan.    Nissan did not have the A-car platform.

20   Q.   Okay.    That was Renault that had that?

21   A.   No, they didn't have it either.

22   Q.   Okay.    And just so I understand, you didn't have any --

23   you didn't go back and engage in any discussions with Renault

24   either then, correct?

25   A.   Not with Renault.    No.
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1    Q.   Okay.     And just to make sure, when we're talking about the

2    technology that Fiat is providing here, the agreement, as I

3    understand it, the proposed industrial alliance agreement, is

4    that what it's called?

5    A.   Yes.

6    Q.   Okay.     That --

7    A.   There was a number of agreements, obviously.     One was

8    industrial and there was other master agreements as well.

9    Q.   Okay.     And did you help negotiate, personally help

10   negotiate the industrial alliance agreement?

11   A.   Yes.

12   Q.   And that talks about the technology that's going to be

13   shared between the companies, correct?

14   A.   Yes, I did.

15   Q.   And under that agreement, Fiat's only bringing to the

16   table for --

17               MS. ASNER:   Withdrawn.

18   Q.   Under that agreement, you have access without charge,

19   let's call it, to any existing technology; is that fair?

20   A.   Yeah.     There's two types of -- I think when you use the

21   word technology, there's intellectual property rights that Fiat

22   owns, and then there's technology in power trains, platforms,

23   and vehicles, and all that, we have access to everything that's

24   in the Fiat Group Auto.     Fiat is made up of a number of a group

25   of companies.     They have Ferrari, which is separate.    There is
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                            CHRYSLER LLC, et al.

1    Maserati, that's separate.   And then they own some suppliers as

2    well, and then they have Fiat Group Auto.     Under that, we have

3    access to all their current technology.

4    Q.   And it's also correct to say that you don't have that same

5    free access to future technology, correct?

6    A.   No.   We have access to future technology, all of it.

7    However, the way it's structured that -- let's assume next year

8    Fiat would like to develop an all new, I'll say, technology in

9    the area of transmission technology.   We have free access to

10   work with them and to invest up front with them, based on the

11   volumes that we've -- that we would look at.

12        For example, assume that there was a million units to be

13   worldwide, and Chrysler needed a hundred thousand of that,

14   Chrysler would pay that 100,000 against a million unit or ten

15   percent of that technology, and we could actually do that up

16   front, which is great, when somebody else is paying 90 percent

17   of the bill.

18        Now, we have an option, this is how we wrote the language,

19   the option was, either you do that or you could wait till the

20   technology's developed, and then pay as you go kind of an

21   approach, which again was a great option for a car company not

22   having to make major investments.   It helps Chrysler, and

23   certainly helps Fiat with volume.

24   Q.   So just to summarize, in answer to my question, you have

25   to pay for that future technology, correct?
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                             CHRYSLER LLC, et al.

1    A.   You have to pay your portion, not the whole amount, which

2    is a very, very good deal.

3    Q.   Okay.    And I think we had some discussion in yesterday's

4    deposition that as you were negotiating the industrial alliance

5    agreement there was some confusion, toward the end of that

6    negotiation, as to what technology would be encompassed within

7    that agreement, fair?

8    A.   That's fair.

9    Q.   Right.   I think we looked at some e-mails that talked

10   about the need to clarify whether all this technology,

11   including future technology, was encompassed with that

12   agreement or just some subset, true?

13   A.   Yeah, let me explain that, though.   It's very important

14   when you use a big term like technology what's included.

15        Ferrari, the car is 250- to $350,000.     The likelihood, in

16   my lifetime, that a technology that was sitting in a Ferrari,

17   making itself to a Fiat 500 small car is very, very remote.        I

18   plan to live a long time by the way, so it's very, very remote

19   that that would happen.

20        So that technology was exclusive from us.     It was really

21   the car brands that Fiat had, which was the Fiat brand.     They

22   had the Lancia brand, and then the Alfa Romeo brand.     Those are

23   what we would call competing kind of platforms that we work

24   under.

25        Any technology that -- one day if it did show up from
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                             CHRYSLER LLC, et al.

1    Ferrari, and went into a Fiat Group Auto, then we could have

2    access to that technology for free.

3    Q.   Okay.    But not to the other stuff that you just described,

4    correct?

5    A.   The future stuff, I explained how that would work in the

6    term sheet.

7    Q.   Okay.    And this was the issue that was being -- attempted

8    to be resolved in the last days of the negotiation of the

9    industrial alliance agreement, correct?

10   A.   Right.    Because what you have, when you go through these

11   deals, you get a term sheet, and the term sheet is not very

12   long.   In general, a lot of the statements are fairly general.

13   It was really our responsibility to make sure that when you get

14   into these industrial agreements there's much more detail, so

15   when somebody one year from now, what was the meaning of that,

16   we worked on coming up with more detail to the actual

17   agreement, so that could somebody could actually reference it

18   in the future.

19   Q.   So it's fair to say, though, isn't it, that at least to

20   some people who are looking at this deal the term sheet on this

21   point was not clear, correct?

22   A.   Was not clear enough.    It was always clear to whoever

23   wrote it.     It may not have been as clear as to the one

24   receiving it at times.    And when you read it for the first

25   time, you don't know the history of what the words were, so
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1    that's why we worked for weeks in Washington to define it.

2    Q.   Okay.   Well, it's fair to say it wasn't clear to Mr.

3    Nardelli, right?

4    A.   Well, on the industrial agreement side, you could ask

5    Mr. Nardelli about his clarity, but obviously he knew the term

6    sheet as well as I did.   But obviously from there, we have to

7    get into the definitive language that backs it up, and that's

8    what I worked on, on behalf of him and others.

9    Q.   Well, do you recall having discussions with Mr. Nardelli

10   concerning this issue?

11   A.   Obviously, because we had a deadline.    We had a deadline

12   to get it all done by the end of April.   And part of that was

13   that the parties of ourselves, Fiat, obviously the U.S.

14   Treasury, and everybody was interested to make sure that the

15   term sheet represented, and certainly took care of the

16   constituents in the future, what did this term sheet really

17   mean.   Because we definitely were looking at the future of --

18   there's a number of parties that have to make sure that we're

19   protecting their interest, and that's what we did.

20   Q.   So it was important to take your time and get it right,

21   fair to say?

22   A.   Absolutely.

23   Q.   And the deadline you're talking about, however, was days

24   away, and that was the deadline that had been imposed by the

25   U.S. Government here, correct?
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1    A.   Right.   And we did.   We had enough time to conclude.

2    Q.   Isn't it fair to say that it was Mr. Nardelli's view, at

3    least as of April 2000 -- April 23rd of 2009, that the deal

4    was, and I quote, "The term sheet is all product and all

5    technology now in development or would be developed," is that

6    fair?

7    A.   That was in his e-mail that you referenced to me

8    yesterday, and of course, we had to define the definition of

9    that, and we were working on that for the following week.     And

10   it was defined to actually explain what we were going to get

11   and when.

12   Q.   But he also said, "We, Chrysler, want to assure that we,"

13   and I would think the U.S. Treasury want this cleaned up,

14   cleaned up to be the way I just read it, correct?

15   A.   No, what he referenced, to the best of my knowledge, when

16   he -- and I've received a number of e-mails from Mr. Nardelli,

17   and this when he said, cleaned up, where there's a deadline,

18   and we obviously worked towards the deadline to have all

19   issues, including the industrial agreement, the master

20   agreements, and all the other -- there's a lot of splinter

21   agreements that came out of there, that needed all to be

22   cleaned up by the deadline, and that's what his reference was.

23   Q.   And ultimately, at the end of the day, it was modified

24   such that it was a smaller set of technology that had the free

25   access, correct?
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                              CHRYSLER LLC, et al.

1    A.   No, I disagree with that.       I explained that.   All of the

2    Fiat Group Auto, whatever was existing, was all free and full

3    access to us.     In the future is how I outlined it.

4    Q.   Well, let me show you what's been previously marked as a

5    deposition exhibit.

6         (Pause)

7             MS. ASNER:     May I approach, Your Honor?

8             THE COURT:     Go ahead.

9         (Pause)

10   Q.   All right.    Let me direct your attention, if I could to

11   Exhibit 5, which I think is the e-mail we've been -- one of the

12   e-mails, at least, we talked about yesterday and I think the

13   one you're referring to in your testimony.

14   A.   Okay.

15   Q.   And this is an e-mail exchange that took place at or

16   around April 23rd of 2009.    Yes?

17   A.   Oh, that's the date on it, yes.

18   Q.   Okay.   And the e-mail toward the bottom of the page is the

19   one from Bob Nardelli, the chairman, that we were just talking

20   about, correct?

21   A.   Correct.

22   Q    And what it says is, "We, Chrysler, want to assure that

23   we, and I would think UST want this cleaned up.       The term sheet

24   is all product and all technology now in development, or would

25   be developed" exclamation point.       So at least, as of that time,
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1    that was his view, correct?

2    A.   Well, this is an e-mail that I think he sent to Mr. Manzo.

3    And of course, he said, "Must get it defined in the master

4    industrial agreement, correct?"    That's what he was referencing

5    that we have to get this totally defined on what is in the

6    technology, what is developed and I'll give you an example.

7         What would a technology. if somebody had -- was thinking

8    of an idea, how could I actually define that in a written

9    document?   I can't.   I mean, that's what research and

10   development is all about.   We did a great job defining clearly

11   the technology we would get, and the stuff in the future.     We

12   set out terms that were satisfactory to Chrysler, definitely

13   satisfactory to Fiat and the U.S. Treasury.

14   Q.   Well, at least as of this time, you say the U.S. Treasury,

15   but who's Matt Feldman?

16   A.   Matt Feldman is a lawyer with the U.S. Treasury.     I do not

17   know his title.    I've met him a few times during the process,

18   but don't know his actual title.

19   Q.   It's fair to say, though, that he was one of the several

20   people that you dealt with and was quite involved in these

21   negotiations, correct?

22   A.   Definitely.   He was with Mr. Bloom -- worked with Mr.

23   Bloom directly.

24   Q.   And he wrote -- Bob Manzo, who's he?

25   A.   Bob Manzo is a -- is one of the experts in this whole area
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                              CHRYSLER LLC, et al.

1    of bankruptcy and he's the leading expert.      And he was involved

2    with Chrysler I think since November of last year or so.

3    Q.   All right.    And he wrote there, right, "We are concerned

4    that Fiat is trying to be squirrelly on this documentation

5    point, on all technology now and in the future, see e-mail

6    below."

7    A.   Yes.

8    Q.   So again, fair to say at least as of that point in time,

9    that was his view, correct?

10   A.   Well, this was a week before we were going to be

11   completed, and that's when they entered or I entered the play

12   to play a big role in defining what that meant in the language

13   with a number of other experts from Chrysler.

14   Q.   You'd been in negotiations on and off for the last say, 90

15   days, correct?

16   A.   Prior to the end of April you're talking?

17   Q.   Yeah.

18   A.   Yes.    Relative to this area of technology, it came up in

19   the last few weeks.

20   Q.   And what was Mr. Feldman, at the DOJ's, response?      He said

21   we know, right?

22               MR. SHUMAKER:   Objection, Your Honor.   Foundation.

23               THE COURT:   All right.   Lay a foundation for the

24   question.

25               MS. ASNER:   Well, Mr. Feldman is the next respondent
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                               CHRYSLER LLC, et al.

1    on this e-mail.    I think it's pretty clear, Your Honor, the

2    foundation of the question.

3                MR. SHUMAKER:    Your Honor, Mr. LaSorda is not on that

4    e-mail.

5                THE COURT:    Make it a little clearer to me then.

6                MS. ASNER:    Sure.

7                THE COURT:    All right.   Thank you.

8                MS. ASNER:    It's all to be the goalie, Your Honor.

9    Q.   Isn't it fair that that was also -- that the U.S.

10   government was also interested in clarifying this point, as of

11   this point in time, Mr. LaSorda?

12               THE COURT:    Just to bring us back.    What specific

13   e-mail are you referring to?

14               MS. ASNER:    I'm referring --

15               THE COURT:    In your binder, it's which one?

16               MS. ASNER:    The same exhibit, Your Honor, Exhibit 5.

17   And now I'm looking at the piece of the chain that is

18   immediately above what I just read, from Matthew Feldman of the

19   DOJ to Bob Manzo, and he responds there, "We know."

20               MR. SHUMAKER:    Your Honor, that e-mail is later in

21   time.     The e-mails are in reverse chronological order.     And

22   that's the subject of my objection.       The witness is not on the

23   document, so there's no foundation to the question.

24               THE COURT:    All right.   I understand now.

25               MS. VARGAS:    Your Honor, could I just make a
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1    clarifying statement?

2              THE COURT:    All right.   No one can hear, what you're

3    saying.   All right.    You're going to have to come down and

4    approach a microphone.

5              MS. VARGAS:    We just objected to the characterization

6    of Mr. Feldman as being at DOJ.

7              MS. ASNER:    I'll correct that, Your Honor, he's with

8    the United States Department of Treasury.

9              THE COURT:    Okay.   So corrected.   Now, the point is

10   that since the e-mails are in reverse -- appear in reverse

11   chronological order, and you're asking about --

12             MS. ASNER:    Well, Your Honor, I don't understand that

13   at all.   I'm actually reading them through -- in the point of

14   time in which they were sent.      They start out Wednesday at

15   20:39:00 hours, and then the next e-mail is at 20:47:00 hours,

16   and then the next e-mail is the next day.       So as I read it,

17   that's chronological order.

18             MR. SHUMAKER:    If you start -- Your Honor, start a

19   chain at the first e-mail back, you'll see that they progress

20   in time and that they start on April 22nd at --

21             THE COURT:    At --

22             MR. SHUMAKER:    -- 2:18 p.m. --

23             THE COURT:    Correct.

24             MR. SHUMAKER:    -- and end up at the top on 4/23/09 at

25   1:58.
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1                MS. ASNER:   Right.   I confess I'm not sure I still

2    understand the objection, Your Honor.

3                MR. SHUMAKER:   To be more explicit, the e-mail

4    would've been forwarded to someone else, and Mr. LaSorda is no

5    longer on the chain.     That's why I had a foundation objection.

6                MS. ASNER:   And I think I just clarified it, to ask

7    what his knowledge was, even separate and apart from the

8    document.

9                MR. SHUMAKER:   He's never seen the document.

10               THE COURT:   All right.    Well, lay a foundation as to

11   why he should know the e-mail you're referring to is the one

12   that's sent on the 22nd at 20:47; is that right?

13               MS. ASNER:   It's there --

14               THE COURT:   Is that it?

15               MS. ASNER:   Yes, Your Honor.

16               THE COURT:   All right.    Go ahead.   Lay a foundation

17   for his knowledge of this particular transmission.

18   BY MS. ASNER:

19   Q.   I'm going to ask about this particular transmission and

20   then I'm going to ask about generally your knowledge, Mr.

21   LaSorda.    It's fair to say that you were involved in the

22   discussions that -- to clarify this term sheet, correct?

23   A.   Yes.

24   Q.   And it's fair to say, is it not, that at least as of this

25   point in time the U.S. Treasury Department also thought this
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1    point was unclear, correct?

2    A.   Obviously everyone is wanting clarity, which was part of

3    the negotiations to get done by the end of April.     And, of

4    course, when it says, "Now we need to look at trying to get

5    this documentation done," the Treasury knows that they have a

6    deadline as well or to asked us to get this concluded with

7    Fiat, which we did.

8    Q.   Okay.     And --

9    A.   To the satisfaction of us, the Treasury, and Fiat.

10   Q.   Within that seven-day window that was remaining, correct?

11   A.   Yeah.     That's a lot of time in this stuff.

12   Q.   Now, --

13              MS. ASNER:   Just give me one moment, Your Honor.

14              THE COURT:   All right.

15        (Pause)

16   Q.   And is it fair to say, Mr. LaSorda, that you don't have

17   any personal knowledge as to whether or not any fairness

18   opinions that related to this evaluation of technology was

19   corrected or was reflecting this change in the term sheet?         Do

20   you know that one way or the other?

21   A.   No, I don't.

22              MR. SHUMAKER:   Objection, Your Honor.    Foundation.

23              THE COURT:   The foundation basis of what, how would

24   he know?

25              MR. SHUMAKER:   Yes, exactly and at what time.
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1             THE COURT:    All right.   Ask those questions, just so

2    we have a frame of reference for his response how he would know

3    whether or not any fairness opinion would be done, and during

4    what period of time are you asking that?

5    Q.   And I'm simply asking that -- to confirm that he has no

6    way of knowing one way or the other whether that was done

7    because he wasn't involved, or otherwise reviewing that at the

8    time, correct?

9    A.   I think your question is on the fairness opinion to what.

10   Is it a fairness opinion on the overall fairness opinion of the

11   company, is it on this technology, is it -- I don't know what

12   your reference is.    If you could help me out.

13   Q.   Okay.   I'll just move on to a new point.

14            THE COURT:    All right.   How much longer is your cross

15   going to be?

16            MS. ASNER:    Oh, I have a while to go, Your Honor.

17            THE COURT:    All right.   A half hour, hour, two hours,

18   three hours?

19            MS. ASNER:    I would say more in the probably hour to

20   two hour range.

21            THE COURT:    Uh-huh.   Well, we're going to stop at

22   approximately 1 o'clock for an hour, and then to the extent you

23   haven't finished by then, we'll pick up again at 2 o'clock.

24   And along those lines -- let's see -- there's a room available

25   that if some of the objectors want to use to set their things
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1    up and possibly use for lunch and that is 606, and that's on

2    the sixth floor.   There's another room available, 607, that

3    could be used for other parties, etcetera.       But if some of the

4    objectors want to use 606, they can, and leave 607 to others.

5    The debtors, I think, are using 622 at this point.      And the

6    committee has a place as well.

7               All right.   Continue the examination then until

8    approximately 1 o'clock.

9               MS. ASNER:   Thank you, Your Honor.

10   BY MS. ASNER:

11   Q.   Now, moving on to a different topic, Mr. LaSorda.      It's

12   fair to say that back in January, and likely earlier, your

13   preferred course of action was for Chrysler to remain as a

14   standalone company and receive some funding, so that it could

15   look for over time, the right strategic partner, correct?

16   A.   In the submission we made to the government on February

17   the 17th, we had three options.   One was a stand alone; one was

18   a Fiat partnership; and the third was, obviously, liquidation.

19   That's what we had submitted.

20   Q.   I'm sorry, I couldn't hear the last part of the answer.

21   A.   That's what we had submitted on February 17th, those three

22   options.

23   Q.   Okay.   Could you just move the mike a little closer?

24   A.   Sure.   I'll try to get it real close here.

25   Q.   And I believe that -- excuse me.   And I believe that you
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1    told me with whatever X dollars of funding that you thought

2    were required for that option, that Chrysler would have at

3    least two to three years to look for the right strategic

4    partner, correct?

5    A.     We said if we got the funding and the option that was

6    chosen was a standalone, over the next two to three years,

7    which was in the submission -- I brought in the music at this

8    time.

9           (Phone Ringing)

10              THE COURT:    I assume they will call back.

11              MS. ASNER:    Okay.

12              THE COURT:    All right.   Go ahead, continue.

13   BY MS. ASNER:

14   Q      Ask to read back, because I lost the part of his answer,

15   but.

16   A.     I think it was the -- well, they can read back.

17              MS. ASNER:    I don't have a --

18              THE COURT:    No, first of all, they can't read back.

19              MS. ASNER:    Right.

20              THE COURT:    It's a digital tape.

21              MS. ASNER:    Right.   That's what I was --

22              THE COURT:    We don't have.

23              MS. ASNER:    So we don't have that ability.     So I

24   guess if you could just --

25   BY MS. ASNER:
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1    Q    I said it again, is it fair to say that --

2         (Phone Ringing)

3             THE COURT:     All right.   Continue.

4    Q.   -- that you thought you had two to three years to find

5    that right strategic partner, correct?

6    A.   Yeah.    In the document of the February 17th, I think

7    somewhere in that huge document, we said that we would -- if

8    that was chosen, we would continue to pursue an outside partner

9    over the next two to three years, that's correct.

10   Q.   And you reviewed that submission before you made it, or

11   before the company read it, right?

12   A.   The February 17th?    Of course.   Yes.

13   Q.   Right.    You agreed with that recommendation, correct?

14   A.   Yeah.    We recommended the standalone as well as the Fiat,

15   all three were outlined.

16   Q.   Well, all three were outlined, but it's fair to say the

17   preferred course of action for Chrysler was the stand-alone

18   option, correct?

19   A.   Yeah.    And the reason for that, we did not have a signed

20   final term sheet with Fiat that was our standalone and we felt

21   strongly that we could survive.

22   Q.   And it's also fair to say you wanted to take the time to

23   find the right strategic partner, correct?

24   A.   We had found one, but we did not have a finalized term

25   sheet for them.
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1    Q.   And you were still looking, right?

2    A.   At that stage, no one else was interested.

3    Q.   Now, it's fair to say of those three options, it was the

4    Auto Task Force that decided which one to take, right?

5    A.   Well, when we made our submission, they came back clearly

6    from the U.S. government, and I believe the president of the

7    United States outlined clearly what our options were.

8    Q.   And he gave you one option, correct?

9    A    His option was that he felt, or I'll use the U.S. Treasury

10   because they obviously gave him the script I would assume, and

11   the option was that we would look at Fiat or some other party

12   that came forward as the potential for Chrysler.

13   Q.   And what -- that statement that you're referring to was

14   the president's statement toward the end of March, correct?

15   A.   Yes.

16   Q.   All right.   But it's fair to say it was -- well, let me

17   show you an exhibit.    If you could look at Exhibit 6 in the

18   binder, please.

19   A.   Okay.

20   Q.   Do you see that?

21   A.   Yes.

22   Q.   And that middle e-mail is dated 3/25/2009 at 7:13 a.m.

23   A.   Uh-huh.

24   Q.   It's to you from Ron Kolka, correct?

25   A.   Yes.
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1    Q.   And it's fair to say that he's reporting on an update

2    concerning where this stands with the U.S. Treasury, correct?

3    A.   Yeah.   He was in Washington and I was back at home base,

4    because we actually had to build cars and still sell them.       So

5    I just asked him for a how you doing, because he's working

6    night and day.   He's been a close friend and colleague of mine

7    for nine years, so I just wanted to find out how he was up --

8    and this was his update.

9    Q.   Okay.   And what's his update for number one?   It says --

10   could you read that, please?

11   A.   It says, "We need a deal with Fiat today that will likely

12   be done, we are told, to pretty much take it."

13   Q.   And you were told that by Treasury, right?

14   A.   This was his e-mail, I was not in the meetings for -- with

15   the U.S. Treasury.

16   Q.   Mr. LaSorda, you understand that to be referring to

17   Treasury, correct?

18   A.   Well, Treasury is the reference of who he would be meeting

19   with, of course.

20   Q.   So this is a reference to Treasury then, right?

21   A.   I assume that's what his reference was.

22   Q.   And that's what you understood it at the time to be,

23   correct?

24   A.   Yes.

25   Q.   Okay.   And as far as I can see, there's no language about
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1    pursuing any other options, right?

2    A.   In the bullet one?

3    Q.   Yeah.

4    A.   No.

5    Q.   Okay.    And then what does item two say?

6    A.   "That we'll call the UAW or union in and tell them to

7    accept the VEBA deal from us" -- from U.S. or us, I don't know.

8    Q.   And again, that was your understanding even prior to the

9    president's announcement on March the 30th, correct?

10   A.   Well, in both references you're making here a lot happened

11   from the 25th to the 30th.    We had six more days.   The Fiat

12   deal did not get done the next day, of course.

13   Q.   Right.    And I'm asking you as to what your understanding

14   was that the Treasury had informed you as of this point in

15   time.   We'll get to the rest later.

16   A.   Okay.

17   Q.   And then item number 3, what does that say?

18   A.   "May announce by Friday, best case."

19   Q.   Again, fair to say that your understanding of that is what

20   ultimately became the -- that was with reference to the

21   president's announcement, correct?

22   A.   That was the day that they had given us by the end of this

23   period, obviously, by the end of March, that they would make a

24   decision.

25   Q.   Okay.    And if you could read the last item, number 4,
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1    please?

2    A.    "We'll do a 363 and then tell the banks, here's the deal

3    take it or liquidate."

4    Q.    Right.   And again, that was your understanding of what the

5    Treasury was telling you to do as of March the 25th of 2009,

6    correct?

7    A.    That -- in any of the interfaces that I was involved in,

8    which were much less than Mr. Kolka and some of the other

9    finance folks, 363 was an option but we were working diligently

10   to try to get all constituents to resolve everything to avoid

11   it.

12   Q.    But fair to say this language doesn't say it's an option,

13   it says, "We'll do a 363," correct?

14   A.    That's what he said, but that wasn't the actual situation

15   that was going on.

16   Q.    Well, you were in those meetings, weren't you, Mr.

17   LaSorda?

18   A     No.   I said those meetings that I attended, not these

19   ones.   Because I was in meetings with Mr. Bloom and Mr. Radner

20   (ph), that that was an option that they were trying to get all

21   the constituents to settle before the end of the period, and we

22   couldn't.

23   Q.    But at least, again, as of this point in time, Mr.

24   LaSorda, on this day with this update that was your

25   understanding of your marching orders, correct?
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1    A.   That was my understanding of what Mr. Kolka's view of

2    the -- was at the time.

3    Q.   And he'd just been in those meetings himself, right?

4    A.   The day before, yes.

5    Q.   And in fact the e-mail immediately following that, on the

6    top, indicates you basically got right to work on the 363 in

7    response to this e-mail, correct?

8    A.   Is this at the top you're referencing?

9    Q.   Yes.

10   A.   It says, "You guys may want to meet today and review the

11   363 split?"    There was a lot of pre-work that we had to do, as

12   a company that was our responsibility, as the leadership of the

13   car company, to prepare for in the case of any event of a

14   decision that was made including liquidation.     We made sure

15   that we had funds available, 750 million that was the number

16   that we said, and it was supported by the board that we have

17   that, in the event of a liquidation, to protect the secured

18   lenders.    And also to be prepared in the event that somebody

19   made a decision on 363.     We just couldn't not be prepared.

20   That was work we did weeks -- well weeks prior to this

21   particular e-mail.   The issue was, would I get back involved to

22   see how the split was on assets.     That's the reference.

23   Q.   Now, --

24               MS. ASNER:   Just give me a moment, please.

25        (Pause)
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1    BY MS. ASNER:

2    Q.   Okay.   Now Mr. LaSorda, assuming for the sake of my

3    question only that the transaction at issue here today is

4    allowed to close on June 15th, for example.     The same plants

5    that are going to be used to make cars and trucks on June 16

6    are the same that are going to be used on June 14th, correct?

7    A.   I don't know what's transpired between April and now,

8    whether or not there's been any decisions on what's going to

9    happen with certain plants.    If I could only reference what my

10   knowledge would be as prior to April is, the plants that were

11   up and running before we went down would be the similar plants

12   that would continue.     Some would be destined to close shortly

13   after we would start back up, that was in our submission.

14   Q.   Okay.   And the same employees are going to be making those

15   cars, right?

16   A.   The same employees would be making those great cars and

17   trucks.

18   Q.   And so as a practical matter, the only difference is the

19   ownership of the assets at that point in time, correct?

20   A.   Between what happens in that 363, which -- that's correct.

21   That is the best of my knowledge one would be OldCo and one

22   would be NewCo.

23   Q.   Now also in connection with the events leading up to being

24   here today in this proposed transaction, you had a lot of

25   involvement, or had --
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1                MS. ASNER:   Withdrawn.

2    Q.   You had specific involvement with issues relating to the

3    UAW, correct?

4    A.   Yes.    I led that area with the UAW and the CAW both.

5    Q.   I'm sorry, I didn't hear the last.

6    A.   The UAW and the CAW.

7    Q.   And that's the Canadian Auto Workers?

8    A.   Yes.

9    Q.   And you had -- and your involvement had to do with

10   renegotiating certain parts of the so-called VEBA obligation

11   that Chrysler had?

12   A.   Yes.

13   Q.   And if you could just explain to me what you understand

14   the VEBA obligation to be.

15   A.   Well, first of all the VEBA obligation prior to this

16   event, we had an obligation, which is the retiree healthcare

17   plan, of about 10.5, 10.6 billion obligation for the future.

18   And we had a payments schedule, that took us out, I believe, to

19   2016 and we had contributions that we would make to this VEBA

20   fund to protect the retirees and their future healthcare,

21   current retirees and future retirees.     And that obligation

22   would be transferred to the UAW and their trustees in January

23   of 2010.    That was how the plan existed, prior to Chrysler's

24   situation.

25   Q.   Okay.    So prior to this bankruptcy, it's fair to say that
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1    approximately 10.5 billion was owed to Chrysler for the VEBA

2    obligation, correct?

3    A.   Owed by Chrysler, correct.

4    Q.   Right.

5    A.   Uh-huh.

6    Q.   All right.    And as I understand it, your job was to

7    restructure with the UAW about half of that obligation, so that

8    after this proceeding, Chrysler would be able to pay that half

9    over a longer period of time, correct?

10   A.   Yes.

11   Q.   And the other, roughly, half of that $10.5 billion

12   obligation was being dealt with by giving the UAW an equity

13   stake in Chrysler, right?

14   A.   Yes.

15   Q.   And that equity stake is roughly how much, sir?

16   A.   Well, I think the final -- what came out of it, which we

17   were not involved in, the U.S. Treasury was the play, was

18   fifty-five percent.    It was not to the UAW.   It was through the

19   VEBA Trust.

20   Q.   And that equity piece was handled directly with U.S.

21   Treasury, right?

22   A.   Yes.   I was not involved in that.

23   Q.   And you personally considered the preservation of those

24   pension benefits to be very, very important, didn't you?

25   A.   Those were healthcare benefits for the pensioners.      Yes,
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1    of course, they're very important.     They'd be important to

2    anybody.

3    Q.   And I think even you told me your dad is a pensioner, and

4    you're a fourth generation Chrysler family, correct?

5    A.   Yeah, I'm very proud of it.     My dad was the head of the

6    union at Chrysler in Windsor as well.

7    Q.   And so you were, therefore, concerned that in any

8    bankruptcy proceeding --

9               MS. ASNER:   Withdrawn.

10   Q.   And you understood, at least as of this point in time,

11   that any VEBA obligation would be junior in priority to the

12   secured lenders of first tier priority here, correct?

13   A.   Well, as I was trained by other lawyers, and how the

14   system worked, obviously you've got tier one, secured, and then

15   second lien, and then of course, where the VEBA sat was

16   something that I couldn't decide nor was I privy to how they

17   were going to be treated.    That was -- that went dealt with by

18   somebody else.

19   Q.   But it's fair to say you knew it was junior in priority to

20   the absolute priority of the creditors, the senior creditors,

21   right?

22   A.   The creditors, senior creditors, were always on -- looked

23   at as the first tier.

24   Q.   Okay.   And you were therefore concerned, that the

25   pensioners in any bankruptcy would not have to take "major
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1    reduction in their benefits," right?

2    A.   But they did, of course.

3    Q.   That was -- your concern was to avoid that, right?

4    A.   Well my concern was to negotiate a deal that allowed

5    Chrysler to preserve cash and make the payment stream extend to

6    instead of 2016 to 2023.   And to reduce the payments in the

7    beginning years, to help Chrysler get off its feet, generate

8    enough cash to preserve the future -- the future of the

9    company.   For example the payment in 2010 originally was almost

10   four billion, and I think the 2010 payment now is 320 million.

11   So they gave up quite a bit.

12   Q.   Still the view that this was a very, very good deal for

13   the UAW, wasn't it, sir?

14   A.   I think if you asked the retirees and you asked Mr.

15   Gettlefinger (ph), I don't think he would think it was a great

16   deal.   He had a better deal before.

17   Q.   Well, it's certainly a better deal than having nothing

18   underneath the secured lien creditors, correct?

19   A.   Well, he has a -- he has a VEBA that will be there

20   provided the company's there because only the company can pay

21   into it.   If we liquidate, the VEBA's worthless.

22   Q.   Right.   Because the first lien secureds have absolutely

23   priority, right?

24   A.   He has two VEBAs as I stated yesterday.   One is a mini-

25   VEBA, which is a plan that's already been protected, roughly
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1    about 1.6, 1.7 billion, and that's already there.      And that

2    moves over to the trust in January, and that's already

3    protected.     The rest would be subject to some -- obviously, in

4    a liquidation would not be there, no further payments would be

5    made.

6    Q.   And if I could direct your attention to Exhibit 1 in your

7    binder, sir.

8    A.   1?

9    Q.   Yeah.

10        (Pause)

11   A.   Okay.

12   Q.   Do you turn -- would you turn to the second page?     You

13   recognize this e-mail don't you, sir?

14   A.   Yes, you showed it to me yesterday.

15   Q.   And it's fair to say, isn't it, that this is an e-mail

16   exchange on April the 10th, 2009, talking about the final

17   proposal rate of VEBA, right?

18   A.   Yeah, but this thing did not get settled for quite some

19   time.     This was dated April 10th.   This was an interim status

20   of what was going on in the VEBA discussions.      The reference of

21   that e-mail in the middle from Andrew Horrocks was a consultant

22   to -- from UBS for Fiat.

23   Q.   But at least as of this -- the Re line does say, "final

24   proposal rate of view," correct?

25   A.   It says final proposal, but as people know, nothing's
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1    final until the end.    That's what happened.   I mean, if you

2    look at the date of when this thing got settled, it wasn't

3    April 10th, it was much later, I believe.

4    Q.   At least at this point in time, what was being discussed

5    as being described among the group, and including you --

6             MS. ASNER:    Withdrawn.

7    Q.   The group recipients include you, correct?

8    A.   Yeah, I received the e-mail as well, it's referenced on

9    page 1 as well.

10   Q.   And the report that says at the very bottom, says "A very,

11   very, very good deal for the UAW.      Bloom is trying to resolve

12   open points tonight, we will see."     And that's a reference to,

13   I assume, Ron Bloom of the Auto Task Force, correct?

14   A.   I'm sorry; could you reference -- what page was that on?

15   Q.   It's on the second page.

16   A.   Oh, second.   I went back to 1.    "There were a number of

17   open issues all of which have been rational, a very, very good

18   deal for the UAW."    This was from Mr. Manzo, I believe.

19   Q.   And you responded to this e-mail on the first page, right?

20   A.   Yeah.

21   Q.   Okay.   And part of what you said was a question, "Did Fiat

22   give them a free ride on pensions not being distressed in the

23   event of a 363?"   That was your question at the time, right?

24   A.   Yes, in the e-mail.   That's correct.

25   Q.   And that was your concern at the time, correct?
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1    A.   Well, the reference here was to determine what was going

2    to happen with the pensions, because at this stage we were only

3    looking at the healthcare portion for retirees.    And I was,

4    again not an expert in 363, was questioning what would happen

5    to the pensions of the UAW workforce in this particular case.

6    And of course, it was referencing that, what would happen in

7    the event did Fiat have any position on pensions as it related

8    to 363.   At that point, I did not know.

9    Q.   And you --

10             MS. ASNER:   Withdrawn.

11             Your Honor, I'm at the end of the end of the topic,

12   and we have two minutes before the hour, if you want to break

13   right now?

14             THE COURT:   All right.   We'll break until 2 o'clock.

15        (Recess from 12:58 p.m. until 2:01 p.m.)

16             THE COURT:   Please be seated.

17        (Pause)

18             THE COURT:   All right.   Excuse me, before you begin,

19   how much more time do you think your cross will take?

20             MS. ASNER:   Your Honor, I'd estimate maybe twenty

21   minutes, Your Honor, twenty-three minutes.

22             THE COURT:   All right.   Is anyone else going to

23   cross-examine this witness?

24             MR. KURTZ:   Your Honor, we may.    Short for us.

25             THE COURT:   All right.   Go ahead.
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1               MS. ASNER:   Thank you, Your Honor.


3    BY MS. ASNER:

4    Q.   Mr. Kolka, let me just ask you ask you one additional

5    question before I move on to a new topic, about the UAW --

6    A.   LaSorda.   LaSorda, you said Kolka.

7    Q.   I'm sorry.   Mr. LaSorda.   My apologies.

8    A.   Okay.

9    Q.   Let me ask you about one other question about your -- the

10   work that you did to renegotiate the VEBA obligation owed by

11   Chrysler in connection with this bankruptcy, and just want to

12   be clear that the -- you renegotiated the half in the form

13   of -- in such a way that the obligation was to be paid over a

14   longer period of time, you renegotiated the payment schedule,

15   correct?

16   A.   That's right.

17   Q.   And as to that half, that's going to be now paid, it's the

18   obligation of Chrysler post bankruptcy pursuant to a note,

19   correct?

20   A.   That's correct.

21   Q.   Mr. LaSorda, you told me yesterday that you have no

22   familiarity with the term zone of bankruptcy, correct?     I'm

23   sorry; the zone of insolvency, correct?

24   A.   I said that to you yesterday and after further questions,

25   I then recalled what that meant.
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1    Q.   Okay.   What do you recall it to now mean, sir?

2    A.   Well, it's the obligation of the senior officer or board

3    member, as it relates to their obligations to the -- to all the

4    constituents, including the creditors and others as it goes

5    into -- as we go into bankruptcy.

6    Q.   Now I think you had testified earlier who Robert Manzo is,

7    correct?

8    A.   Yes, I did.

9    Q.   All right.     And you told me yesterday he's considered one

10   of the leading experts in his area, true?

11   A.   That's what I heard from third parties.    I met him for the

12   first time in November.

13   Q.   And you told me that you came to rely on his judgment

14   after working with him for many months in the course of this

15   process, correct?

16   A.   Yes.

17   Q.   All right.     And you trusted him, didn't you?

18   A.   Yes.

19   Q.   And isn't it correct, sir, that as late as mid-April,

20   Mr. Manzo was recommending that everyone including Chrysler and

21   Treasury reconsider the alliance with GM, that was relooked at

22   as of the fall of 2008, that's true, right?

23   A.   Well, the way you said it, if he was asked --

24   Q.   Could you --

25   A.   -- while he was in --
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1    Q.   -- let me just step back.   Could you answer my question

2    yes or no, he made that recommendation didn't he, sir?

3    A.   Can you repeat your question, because the way you asked

4    it, I'd have to say no?

5    Q.   All right.   Well, let me ask it this way.   He made a

6    recommendation in mid-April that that was the recommended

7    course of action; to relook at that proposed alliance, correct?

8    A.   He, in his -- even in the document you showed me

9    yesterday, he asked that we look at, at the request of somebody

10   from the Treasury, that we look at three specific platforms, --

11   Q.   Okay.   Let's take --

12   A.   -- which were specifically the truck, the Jeep, and the

13   minivan.

14   Q.   Okay.   So let's take a look at that e-mail we're talking

15   about.   I think it's Exhibit 3, sir.

16   A.   Okay.

17   Q.   And if you could start with the -- looking at the e-mail

18   at the bottom, that's from Bob Manzo to you and others

19   including folks at Treasury, correct?

20   A.   Yes.

21   Q.   And it's dated April 14th, 2009, right?

22   A.   Yes.

23   Q.   All right.   If you could read the last two paragraphs of

24   his e-mail, too, please?

25   A.   This is -- it's titled Jeep, truck, minivan.
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1    Q.   Right.    I ask you to read the last two paragraphs of the

2    e-mail, sir, into the record.

3    A.   "We continue to believe that revisiting the combination

4    alliance discussion with GM from the fall of '08 is the best

5    alternative for all parties.

6         "Please let me know if you'd like to walk through the

7    Chrysler-GM synergy analysis that we provided last week."

8    Q.   But after he made that recommendation, you had a

9    conversation with him and said, you disagree with the idea of

10   doing that, correct?

11   A.   Yeah.    Again, yesterday when you asked me the question --

12   Q.   Sir, if you could answer my question.     Did you tell him

13   that you disagreed with doing that, yes or no?

14   A.   On the Jeep, truck and minivan, I disagreed with doing

15   that, that's correct.

16   Q.   Right.    And the reason was that was because GM, in your

17   view, would only take the assets they wanted and the rest would

18   be unable to survive, that's right?

19   A.   Yes.

20   Q.   And you didn't want that to happen, correct?

21   A.   I said it wasn't the best option for us to pursue, that's

22   correct, because people didn't know the impact of what GM was

23   going to take.

24   Q.   Well, my -- people didn't know, but if it -- he said in

25   this e-mail, that that was the way to maximize the value of the
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1    assets, correct?

2    A.   I don't see that being written in here.     He just said it

3    was -- he would believe that revisiting that alliance

4    discussion with GM should be pursued.

5    Q.   Right.   And the reason you didn't want to do it, was

6    because -- not because it might maximum the value of the assets

7    but because factory workers and other folks might lose their

8    jobs, true?

9    A.   One more time.    The reference of this specific discussion

10   and when he called me on that, which is --

11   Q.   Mr. LaSorda, --

12   A.   -- referenced at the time, was Jeep, truck and minivan, --

13            THE COURT:    Let him finish, please.

14   A.   -- that was the reference.    It was on Jeep, truck and

15   minivan to do a study, on whether or not that was feasible.       I

16   was the one that said, why don't they look at the overall study

17   that we did with GM the year before.    That's old information,

18   but it was dated back in August of 2008.

19            This was a question coming from the U.S. Treasury, I

20   believe that's where it came from, that asked what if we took

21   Jeep, truck and Minivan only and left the rest to go into

22   solvency at Chrysler and GM would pick off those assets.

23   Q.   And you didn't want to do that, right?

24   A.   I explained why it wouldn't work, and that's why I

25   recommended it.    It didn't make any sense to do it.
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1    Q.    Now, also back in the fall of 2008, you had actually done

2    a breakup analysis for Chrysler, hadn't you?

3    A.    What is your reference to a break-up analysis?

4    Q.    Well, had you done one, sir, or not?       Do you know what

5    I'm   --

6    A.    Well, I personally did not do one.    I think people like

7    Mr. Manzo and others, what would happen if we went into

8    liquidation, what would happen.     He did a liquidation analysis

9    of what could happen to the company.

10   Q.    Well I'm not talking about liquidation analyses, I'm

11   talking about Chrysler doing a breakup analysis for all its

12   component parts.

13   A.    I don't recall that we did a detailed breakup analysis,

14   because we had looked at what assets we could look at and this

15   was another example of the U.S. Treasury asking us to do a

16   similar thing.

17   Q.    Sir, if you could turn to tab 9.

18   A.    Okay.

19   Q.    And if you could tell me what that says.

20   A.    It says, "Breakup Valuation."

21   Q.    As of what date, sir?

22   A.    This was October.

23   Q.    October of what year?

24   A.    Sorry; October 2008.

25   Q.    Okay.   Does this refresh your recollection that Chrysler
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1    put together a breakup valuation -- a breakup analysis as of

2    that point in time, sir?

3    A.   Can I just briefly look at a couple of more pages, please?

4    Yes, I remember that something like this had been done, yes.

5    Q.   All right.    And this was put together by the team that you

6    testified earlier, your team of great talent within Chrysler

7    and Cerberus, correct?

8    A.   I don't believe this was done by my team, no.

9    Q.   Well, sir, it says Chrysler LLC breakup valuation.

10   A.   I know what it says.    I was not involved in the detail

11   analysis of this document.    This was probably done by finance.

12   Q.   Finance within Chrysler?

13   A.   Yes.

14   Q.   And it was done with the assistance of Cerberus as well,

15   correct?

16   A.   I think there were people from Cerberus that were actually

17   on payroll in finance.    They may have been involved in this, I

18   would assume, but I'm not sure.

19   Q.   Well, maybe if you could take a look at the e-mail that

20   immediately precedes it, that might refresh your recollection.

21   A.   Okay.   Is that Exhibit 8?

22   Q.   Yes, it is.

23        (Pause)

24   Q.   Do you see that at folks at Cerberus are forwarding the

25   analysis after they provided some input?
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1    A.   Yeah, Benjamin Humphries (ph.) was a Cerberus employee

2    that was assigned, so was Julie McArthur (ph.) worked with us

3    at Chrysler.

4    Q.   And this was the part of the team that you described as

5    having great talent earlier today, correct sir?

6    A.   These two gentlemen, Mr. Humphries is a very good --

7    Q.   Sir, --

8    A.   -- financial analyst, that's true.

9    Q.   -- are these a part of the team that you described earlier

10   in your testimony, as having great talent for doing this type

11   of analysis, aren't they?

12   A.   Yes, they are both very good people, yes.

13   Q.   Okay.     And this was put together at a time already when

14   the markets had begun to deteriorate, correct?

15   A.   They started, like we said, in June or July.

16   Q.   Right.    And this is October, right?

17   A.   Yes.

18   Q.   But you personally, sir, didn't support the idea of a

19   break-up of Chrysler, did you?

20   A.   No, I did not.

21   Q.   Because people would lose their jobs, right?

22   A.   Well first of all, if I may, I'd like to explain.    Do you

23   want me to explain why or --

24   Q.   No, I'd just like you to answer my questions.

25   A.   Well, not only would people -- thousands of people lose
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1    their job but the entire enterprise couldn't operate.     And

2    dealers and suppliers wouldn't get -- suppliers wouldn't get

3    product, and dealers wouldn't get product either.

4    Q.   Right.   Regardless of whether it would maximize the

5    assets, upon sale, you didn't support it, because of -- for

6    those reasons, correct?

7    A.   For the reasons that this enterprise wouldn't survive is

8    the major reason, and where we are today, would certainly

9    maximize the value of the company in the future.

10   Q.   Well, it's fair to say, sir, that your primary concern in

11   all of this, was ensuring that Chrysler would survive, as a

12   going concern regardless of whether that decision maximized the

13   value to the creditors, correct?

14   A.   No, I don't agree with that.   When we look at all

15   decisions we're looking at all the stakeholders.    If they're

16   parcel assets that we could sell to an individual, we sold, I

17   think during the period, and I could be wrong by the number,

18   but we sold almost three-quarters of a billion of assets over

19   an eighteen month period.   So along the way, we were always

20   trying to generate cash for the company.

21   Q.   Mr. LaSorda, it's fair to say that at no point prior to

22   this bankruptcy filing did you ever view it as your duty to

23   maximize the creditor -- to maximize the recovery to the senior

24   secured lenders, correct?

25   A.   Our responsibility was to keep the company profitable, if
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1    we could, and manage the business.      We had to look at all

2    constituents, including the creditors.      I mean that's our job.

3    Q.   Right, including the UAW who was junior to them, in terms

4    of priority, correct?    That's your testimony?

5                MR. SHUMAKER:   Objection, Your Honor, if counsel

6    could stop interrupting the witness, please.

7                THE COURT:   All right.   Counsel, just restate the

8    question.

9    Q.   You said you wanted to look at all stakeholders, you

10   weren't attempting to maximize the value to the secured

11   lenders, correct?

12   A.   Well, you maximize the value.      That's what you do, is

13   running a company, trying to maximize the value for all

14   stakeholders, which would include, obviously, the creditors.

15   Q.   Which would include the folks -- you were trying to

16   maximize the value to the folks who were junior in priority,

17   correct?

18   A.   No, I don't believe that at all.

19   Q.   Well the UAW, you testified earlier, that's -- those folks

20   are junior in priority to the senior secured creditors here,

21   correct?

22   A.   That is correct in the structure of how this works in

23   bankruptcy, yes.

24   Q.   And the reason why you didn't support the break-up was

25   because those pension benefits, for example, wouldn't be
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1    secure, correct?

2    A.   At that point in time, we're talking about October.        We're

3    still developing a plan for the government for the end of the

4    year.   So this --

5    Q.   Mr. LaSorda, if you could answer my question.

6                THE COURT:   Please, stop.   Thank you.    Finish your

7    response.

8                THE WITNESS:    When you're looking at October, or even

9    before October, at no time -- we still hadn't presented any

10   proposal to the U.S. government.      And to talk about creditors

11   as a single body, we were looking at all the constituents, and

12   all the stakeholders for the whole enterprise.        So we're making

13   decisions to save the enterprise, that's in essence what we're

14   paid to do.

15   Q.   All right.      So take a look, sir, if you would at the

16   actual break-up valuation that was done as of October 2008.

17   A.   Okay.

18   Q    If you'd take a look at page three, for example.

19   A.   Okay.

20   Q.   And could you read me the valuation summary of the total

21   asset value under the low case scenario, sir?

22   A.   Under the low was -- total was 91 --

23   Q.   9.1 billion dollars, right?

24   A.   And thirty-five billion of liability.

25   Q.   I didn't ask about that.      I asked about the total asset
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1    value.

2    A.   Yeah, the total asset value was 9.1.

3    Q.   Okay.     What was the total -- in the base case, what was

4    the total asset value?

5    A.   17.2.

6    Q.   17.2 billion dollars, right?

7    A.   Yes.

8    Q.   And the high case?

9    A.   25 billion.

10   Q.   25 billion?

11   A.   Uh-huh.

12   Q.   But you recommended against doing anything like that,

13   correct, sir?

14   A.   Yeah, I did not recommend that we do this.      Yes.

15               MS. ASNER:    I'm done, Your Honor.

16               THE COURT:    Thank you.   Mr. Lauria?

17               MR. LAURIA:    Nothing, Your Honor.

18               MR. SULLIVAN:    Your Honor, I have about five or ten

19   minutes.

20               THE COURT:    Were you here when I asked if anyone else

21   was going to cross-examine the witness?

22               MR. SULLIVAN:    I thought you said anyone else, Your

23   Honor, did I mishear you?.

24               THE COURT:    No, when we began at 2:00, I asked who

25   else would cross-examine the witness --
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1              MR. SULLIVAN:    I raised my hand up, Your Honor, I

2    thought you saw it.

3              THE COURT:   All right.   I didn't see it.   Go ahead.

4         (Pause)



7    Q.   Mr. LaSorda, what role did you have in the negotiation of

8    the master transaction agreement?

9              UNIDENTIFIED SPEAKER:     Could you identify yourself,

10   please.

11             THE COURT:   One second, please.

12             MR. SULLIVAN:    I apologize, please.   Your Honor,

13   James Sullivan of Arent Fox, counsel for Timken Superior

14   Industries International and Harman.

15             THE WITNESS:    Again, I'm sorry.


17   Q.   Mr. LaSorda, what role did you have in the negotiation of

18   the master transaction agreement?

19   A.   Well, there are very many agreements, but my role was

20   primarily in the industrial agreement for the -- is this the

21   final agreements that we were negotiating with Fiat and others?

22   Q.   That's correct.

23   A.   Yeah.   Mainly I was involved in the industrial agreements

24   and the detail of my area of knowledge.    And that led into, I'm

25   sure, a lead into the master transaction agreement.
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1             MR. SULLIVAN:   Permission to approach the witness,

2    Your Honor?

3             THE COURT:   Go ahead.


5    Q.   Mr. LaSorda, I handed you a copy of what purports to be

6    the master transaction agreement, the agreement that the Court

7    is being asked to approve at the hearing today.

8    A.   Okay.

9    Q.   Are you familiar with that agreement?

10   A.   I have never -- I left the company at the end of April, so

11   a lot of these documents I did not get.   Now, the development

12   of some of the -- again, the industrial agreement and things

13   like that, I was involved in, but I've never received a copy of

14   this document.

15   Q.   Do you know who within Chrysler was responsible for

16   negotiating that agreement?

17   A.   Well, we had both inside and outside counsel, of course.

18   Holly Leese and Mr. Kolka would been around it, and myself, in

19   certain portions like I mentioned.

20   Q.   Were you -- are you familiar with any drafts of that

21   agreement before it was executed?

22   A.   I can assure you that I never read a draft this big.

23   Because -- but if there were certain content, again, that was

24   going to be included in this, that are related to my area of

25   expertise, I would've looked at it, but there's no way that I
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1    would've read a document like this.

2    Q.   Are you familiar with the provisions in the agreement that

3    deal with the treatment of contracts?

4    A.   No, I'm not.

5    Q.   Okay.   So you're not familiar with the provisions that

6    deal with the acquisition by the purchaser of rights under

7    assumed contracts versus contracts that were going to be

8    excluded?

9    A.   Relative to the contracts, I was more involved in the

10   asset side of the -- of this transaction, meaning what plants,

11   what technology and what products.     But as far as specific

12   contracts, I was not involved in that.

13   Q.   Okay.   I'm not asking you about specific contracts.   I'm

14   just talking about in terms of the language in the purchase

15   agreement.

16        If you want to look, for example, at Section 2.06 and 2.07

17   of the agreement.

18   A.   Section 2.06 was it?

19   Q.   Right, 2.06 and 2.07.

20   A.   Sorry, I'm trying to -- I've got 2.06, page five.

21   Q.   Do you see up, I think it's 2.06, it might be 2.06(a), I

22   think it references the definition of assumed contracts?

23   A.   Like I said, in my role, I would never get into the

24   detail, legal language of contracts.

25   Q.   Okay.   So --
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1    A.   That would be left to the legal staff --

2    Q.   So you weren't involved in any --

3    A.   -- and the host of represen --

4    Q.   -- negotiation of Section 2.06 and 2.07, is that correct?

5    A.   Detailed discussions on these and the language basis, no,

6    I would not have been involved in that.

7    Q.   And do you know who was involved in those negotiations

8    with the company?

9    A.   One more time, I would say that we had legal staff both

10   internal and outside, SRZ, a lot of those people would've been

11   involved in the detailed legal language.

12   Q.   Okay.    And was there someone within Chrysler whose job it

13   was to work with legal counsel, in order to negotiate this

14   agreement and to --

15   A.   Yeah.

16   Q.   -- get --

17   A.   That would've been Holly Leese, our chief legal counsel.

18   Q.   Okay.    And as far as you know, is she in the courtroom

19   today?

20   A.   Yes.

21               MR. SULLIVAN:    I have nothing else for this witness,

22   Your Honor.

23               THE COURT:   All right.   Anyone else?

24               MR. BARKASY:    Your Honor, I have two or three

25   questions.
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1                THE COURT:   As long as they're not long questions, go

2    ahead.

3                MR. BARKASY:    Your Honor, I'm Richard Barkasy from

4    the Schnader Harrison Segal & Lewis law firm, and we represent

5    the Ad Hoc Committee of Consumer Victims of Chrysler, LLC.



8    Q.   Mr. LaSorda, is it fair to say that in making its

9    decisions related to the Fiat transaction, that Chrysler

10   considered all constituents and all stakeholders?

11   A.   Yes.

12   Q.   To your knowledge, to what extent did Chrysler consider

13   tort claims in its negotiations with Fiat?

14   A.   I was not involved in any of the tort claims or any of the

15   product claims or anything like that.

16        I was, again -- there was almost, you know -- I had the

17   expertise in manufacturing and product, and that's the area

18   that I focused on during the transaction, nothing related to

19   tort.

20   Q.   So you don't recall any discussions that you participated

21   in with Fiat, relating to tort claims?

22   A.   I was not in any discussions with Fiat.

23   Q.   And did you participate in any discussions with the U.S.

24   Treasury regarding tort claims?

25   A.   No, I was not.
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1    Q.   Do you have any knowledge about the extent to which tort

2    claims were considered by Chrysler in its decision to enter

3    into its agreements with Fiat?

4    A.   No, I was not involved in that either.

5                MR. BARKASY:    Thank you.

6                THE WITNESS:    You're welcome.

7                THE COURT:     All right.    Thank you.

8                Any redirect?

9                MR. SHUMAKER:    Your Honor, very briefly.



12   Q.   Mr. LaSorda, if I could direct your attention to Exhibit

13   No. 9 in the binder that Ms. Asner gave to you.

14   A.   Yes.

15   Q.   Do you have that exhibit in front of you?

16        If you could flip to page three, she was asking you about

17   a valuation summary there?

18   A.   Yes.

19   Q.   Are you there?      Okay.

20        And she asked you some questions about this document and

21   you indicated that you did not support the breakup of Chrysler

22   at this time, along the lines specified in this document; is

23   that right?

24   A.   Yes.

25   Q.   Could you just share with us why that was?
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1    A.   Well, first of all, if you were to take Jeep for example,

2    or any one of the brands, as a stand-alone, to take it out of

3    the enterprise, it's fully integrated in engineering and

4    manufacturing, so Jeeps are built beside Dodges or Chryslers or

5    vice versa, they're all built together.

6         And to try to separate that, and say to somebody, let's

7    leave the rest of the company on the floor, and just take Jeep,

8    what happens to the suppliers, what happens to the plants, and

9    it's not even a viable exercise to try to separate it, because

10   it's fully integrated.    All the engineering is integrated, the

11   manufacturing.   And the suppliers would not make it, because a

12   supplier, the way it would work, if I'm supplying you both Jeep

13   parts and Dodge parts, for example, in the same plant, how

14   could anybody conceive that the supplier would willingly just

15   send you Jeep parts, and lose all the business for Dodge parts.

16   They just won't do that.    They'll want to be fully paid, and

17   you'd have to financially cover that.

18        That's why in some of these cases, who had the cash to buy

19   this stuff?   Nobody.   I mean, it wasn't even available.   Nobody

20   was looking to buy other people's brands, because they had no

21   cash for themselves.

22   Q.   On or about the date of this document, which is October

23   14, 2008, were you aware of any offers for Chrysler's assets,

24   either in whole or in part in the 9.1 billion dollar range, as

25   indicated on the valuation summary on that page?
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1    A.   The only assets that we had under consideration, which we

2    could not finalize a deal because of the trouble we went into,

3    was the Viper car, which is a very small transaction, and we

4    never ever got a definitive agreement with anyone on that.

5         None of the other assets during that period of October to

6    the end of the year could we sell any.

7    Q.   Any offers higher than 9.1 billion dollars that you're

8    aware of in that timeframe?

9    A    There were no offers on Chrysler or any of its brands.

10            MR. SHUMAKER:    Thank you very much, Mr. LaSorda.

11            THE COURT:   All right.   Recross?

12            MS. ASNER:   No, I have nothing, Your Honor.

13            THE COURT:   Anyone else?

14            All right.   Thank you.   You may step down.

15            THE WITNESS:    Thank you, Your Honor.

16            THE COURT:   Mr. Kurtz, I --

17            UNIDENTIFIED SPEAKER:     Do you want to pick back up

18   with Manzo?

19            THE COURT:   That's what I'm going to inquire.      I

20   assume you're ready, Mr. Kurtz, for Mr. Manzo?

21            MR. KURTZ:   I'm ready, Your Honor.

22            THE COURT:   All right.   As we're waiting for the

23   witness, how long do you believe your cross will take?

24            MR. KURTZ:   Depending upon how much fencing there is,

25   Your Honor, perhaps an hour and a half.    May I approach?
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1               THE COURT:   Yes.

2               Thank you.   Is there anyone else, at this point, know

3    whether they're going to cross-examine Mr. Manzo?

4               UNIDENTIFIED SPEAKER:     I may, Your Honor, probably

5    five or ten minutes.

6               MS. ASNER:   Five or ten minutes.

7               THE COURT:   All right.

8         (Pause)

9               THE COURT:   Proceed, please.

10              MR. KURTZ:   Thank you, Your Honor.


12   BY MR. KURTZ:

13   Q.   Afternoon, Mr. Manzo.

14   A.   Good afternoon.

15   Q.   Has Chrysler obtained regulatory approval yet to

16   consummate the transaction contemplated by this 363 sale?

17   A.   I don't know if it's been obtained yet.      I know it's in

18   process.

19   Q.   Do you have any projection as to when that government

20   approval will be obtained, if it's obtained at all?

21   A.   No, I don't.

22   Q.   Let me start off by asking you about your interest in this

23   case.   Your firm has a compensation arrangement here, correct?

24   A.   It does, yes.

25   Q.   And pursuant to that compensation arrangement Capstone's
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1    been paid about 9.3 million dollars to date?

2    A.     That is correct.

3    Q.     And you believe that you have a success fee, depending

4    upon whether this Fiat alliance is consummated, correct?

5    A.     We have a transaction fee for any sale of the majority of

6    the assets of Chrysler to Fiat or to any other third party.

7    Q.     Including a sale that is approved here in court, the 363

8    sale that we're here for, correct?

9    A.     That is correct.

10   Q.     And how much will your firm receive after the Court

11   approves the 363 sale?

12   A.     Seventeen million dollars is the size of the transaction

13   fee.

14   Q.     And how much of that seventeen million dollars will go to

15   you directly?

16   A.     Approximately ten million.

17   Q.     That gives you a powerful financial interest in this

18   motion, doesn't it?

19   A.     Not in my opinion it doesn't.

20   Q.     No?   Is ten million dollars a lot of money for you?

21   A.     It is a sizeable amount of money, but it's not enough to

22   buy my integrity.

23   Q.     No, but you do get it, if the sale motion's approved,

24   right?

25   A.     That is correct.
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1    Q.   And you don't get it if it's not, right?

2    A.   If the Fiat transaction is not approved, that is correct.

3    However, to the extent, as I mentioned earlier, there's another

4    transaction meeting the criteria of our compensation agreement,

5    the transaction fee would be paid.

6    Q.   And you contemplate that there would be another

7    transaction that would qualify as a success, so that your firm

8    could receive seventeen million dollars, and you personally

9    could receive ten million dollars?

10   A.   Not at the moment from what bids have been received to

11   date.

12   Q.   So all your eggs are in the 363 basket, right?

13   A.   What do you mean by that?

14   Q.   The ten million dollars that you hope to earn, are all

15   tied up into the success of this 363 sale motion, right?

16   A.   I would receive, or the firm would receive seventeen

17   million dollars in the transaction fee, if the Fiat transaction

18   is consummated, that's correct.

19   Q.   Pursuant to the 363 sales motion, right?

20   A.   Pursuant to any sale of the majority of the assets of

21   Chrysler.

22   Q.   Including the 363 sale motion, in which you are providing

23   supporting testimony, right?

24   A.   That is correct.

25   Q.   You've testified in court before?
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1    A.   I have.

2    Q.   And do you understand that it is improper for an expert

3    witness to have a contingency interest in the outcome of a

4    motion?

5    A.   I'm not a lawyer, so I don't understand that distinction.

6    Q.   Has anybody ever addressed with you the problem with

7    having a witness that receives compensation, depending upon the

8    resolution of a litigation?

9    A.   No, they haven't.

10   Q.   All right.     Let's look at the evolution of your

11   liquidation analyses in light of your financial interest in

12   this case.     You filed a --

13             MR. CULLEN:    Objection, form of the question.

14             MR. KURTZ:     On cross, Judge?

15             THE COURT:     Well, restate the question.

16   BY MR. KURTZ:

17   Q.   You filed a declaration in this case on April 30th, right?

18   A.   I believe that's correct.

19   Q.   And that included a liquidation analysis, right?

20   A.   That is correct.

21   Q.   And liquidation analysis had a liquidation value as high

22   as 2.6 billion dollars, right?

23   A.   I believe that's correct.

24   Q.   Which was actually in excess of what the senior secured

25   lenders are going to receive if the 363 sale motion is
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1    approved, right?

2    A.   That would be correct, except for the fact that at that

3    time, I believe I testified that that amount would be reduced

4    by the reduction in cash --

5    Q.   Well, wait, wait.

6    A    -- that actually existed at the time when I testified.

7    Q.   I'm going to get to that.    You testified at the DIP

8    hearing, right?

9    A.   I did testify at the DIP hearing, yes.

10   Q.   And at the DIP hearing, I asked you about your liquidation

11   value being as high as 2.6 billion dollars and you confirmed

12   that, right?

13   A.   I don't recall.   I'm sure I did if it was in my

14   declaration.

15   Q.   Right.    And it wasn't until the next day at the motion on

16   sales procedures, that you came back and reduced that

17   liquidation value, right?

18   A.   I don't recall if -- which particular hearing it was at,

19   but I do recall testifying that it would be reduced for the

20   diminution in cash.

21   Q.   But it was only the day after the DIP hearing, right?

22   A.   As indicated, I don't recall whether it was the first day

23   or second day, although I do know I testified to it.

24   Q.   Well, you certainly understood that the senior secured

25   lenders were trying to establish that they would do better in a
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1    liquidation than they'd under the 363 sales plan, right?

2    A.   I'm sorry, can you repeat that one?

3    Q.   Yeah.    You understood that the senior secured lenders were

4    trying to establish that they would do better in a liquidation

5    at 2.6 billion dollars, as compared to the 363 sale where

6    they'll receive 2 billion, right?

7    A.   Yes, I believe I heard those points being made.

8    Q.   And then it was the next day when you reduced your

9    liquidation value from 1.6 -- I'm sorry, from 2.6 to 1.6

10   billion dollars, right?

11   A.   Again, I don't recall whether it was the first day or the

12   second day.    I know I testified during that time period that it

13   would be reduced for the diminution in cash.

14   Q.   Okay.    And do you recall that that reduction came about

15   because Jones Day asked you to change your liquidation value?

16   A.   No, I don't recall that.

17   Q.   All right.    Do you see the binder that I placed in front

18   of you earlier?

19   A.   There's several.   One says -- I assume you mean this one,

20   it says Manzo on it?

21   Q.   That's your name, right?

22   A.   Yes, it is.

23   Q.   That's the one.

24        Can you open what's been --

25            MR. KURTZ:     And, Your Honor, we will submit formal
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1    marked documents.    But for today's purposes, I will refer to

2    the first exhibit as Pensioner Exhibit No. 1.

3    BY MR. KURTZ:

4    Q.   Can you turn to that, please?

5    A.   Sure.

6    Q.   This is an e-mail chain from Monday, May 4, 2009,

7    following the DIP hearing, right?

8    A.   I have to read it first.

9         (Pause)

10   A.   Yes, I've read it.

11   Q.   Okay.    And that's an e-mail from the day of the DIP

12   hearing, May 4th, after it was completed, right?

13   A.   Yes, it's dated May 4th.

14   Q.   And you're reporting about what happened in court, right?

15   A.   Yes, I am.

16   Q.   And by the way, at the bottom, you refer to Mr. Lauria and

17   say, “He was ridiculous,” right?

18   A.   Yes.

19   Q.   And what did you mean by that?

20   A.   I thought some of the statements, in my opinion, were

21   ridiculous.

22   Q.   Which statements, sir?

23   A.   Comments about death threats and things regarding the

24   executive branch of the government.

25   Q.   You thought it was ridiculous that Mr. Lauria reported
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1    that certain of his clients had received death threats?

2    A.     I thought the way it was characterized was ridiculous,

3    yes.

4    Q.     Would you think it was ridiculous if you had received a

5    death threat?

6    A.     It depends on who the death threat was from.

7    Q.     There's an irony in your statement of Mr. Lauria that I'm

8    not going to explore right now.

9           If you move up to the next e-mail, it says, “Tim, for some

10   reason, Jones Day thinks we have to put on more direct on the

11   liquidation analysis,” right?

12   A.     Yes.

13   Q.     And then it was the next day that you came in and reduced

14   your liquidation value by a billion dollars, right?

15   A.     Again, I don't recall whether it was the first day or the

16   second day.

17   Q.     Okay.

18   A.     I do recall talking about the reduction in cash, however.

19   Q.     And the fact that it was -- whether it was the first day

20   or the second day, it was Jones Day that asked you to come back

21   and put more direct on the liquidation analysis, right?

22   A.     They asked me to do that, but they didn't direct me to

23   change any particular parts of the liquidation analysis.

24   Q.     Okay.   But they asked you to put on more liquidation

25   testimony, and you came in and knocked it down a billion
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1    dollars, right?

2    A.   Again, I know I testified in one of those two days about a

3    reduction in cash, yes.

4    Q.   And if you look at the top of your e-mail, you also talk

5    about highlighting Kolka's screw-up, those are your words,

6    right?

7                MR. CULLEN:   Objection.

8    BY MR. KURTZ:

9    Q    Oh, I'm sorry.    Matthew Feldman's actually a senior

10   representative of the Treasury Department, right?

11   A.   Yes.    He's part of the Automotive Task Force, I believe.

12   Q.   And he says, “It's not for tomorrow, and will highlight

13   Kolka's screw-up,” right?

14   A.   That's -- those are the words that he uses in his e-mail,

15   that's correct.

16   Q.   Right.    And what was your understanding of what Mr.

17   Kolka's screw-up was?

18   A.   I don't know, I wasn't in court.

19   Q.   Do you have any idea then why the Treasury Department was

20   communicating with you about Kolka's screw-up?

21   A.   I have no idea.

22   Q.   Now, when you came into court and said that the

23   liquidation value had dropped a billion dollars, you hadn't

24   actually completed a full liquidation analysis, right?

25   A.   No, I had looked at the change in the cash balances.
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1    Q.   All right.   And then subsequent to that, you went and

2    performed yet another liquidation analysis, right?

3    A.   That is correct.

4    Q.   And this one comes out now between minus 266 million and

5    only 1.6 billion, right?

6    A.   I don't believe those are the amounts that are in the

7    updated liquidation analysis.

8    Q.   Well, you tell me what the range is now.

9    A.   Is it in the book that you've given me?

10   Q.   No.

11              MR. CULLEN:   Do you want him to have it, counsel?

12   A.   I believe on a net present value basis, the high range is

13   approximately $1.2 billion.

14   Q.   Okay.

15   A.   And the low range is negative 407 million.

16              MR. CULLEN:   Counsel, if you want him --

17              MR. KURTZ:    That's okay.

18   BY MR. KURTZ:

19   Q.   So you were able to move the liquidation analysis down

20   even further, right?

21   A.   I'm sorry, when you say move?

22   Q.   From 2.6 to 1.6 to 1.2, those are downward movements in

23   liquidation value, right?

24   A.   Yes, those are reductions in value.

25   Q.   All in support of an approval here which will result in a
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1    payment to you of ten million dollars, right?

2    A.   I'm sorry, I don't understand that question.   Can you

3    repeat that?

4    Q.   Yeah.   All these movements down the liquidation support

5    the motion which if it's successful, will result in you being

6    paid ten million dollars, right?

7    A.   I don't know if they do or don't support the sale motion.

8    I can tell you that from my professional point of view, they're

9    appropriate changes to be made, to update the company's

10   realizable value based upon a change in time.

11   Q.   And they just happen to support the motion that will get

12   you ten million dollars, though, right?

13   A.   Again, I don't know if they do or don't support that.      I

14   can tell you that I believe that the analysis is, from a

15   financial point of view, indicative of a range that would be

16   received upon liquidation of Chrysler in today's marketplace.

17   Q.   How long have you been a restructuring expert?

18   A.   I've been in the restructuring business for approximately

19   twenty-five years.

20   Q.   Okay.   And your testimony is you don't understand the

21   impact of a liquidation value on the approval process, for

22   either a plan or a 363 sale?

23   A.   I certainly could listen to the arguments back and forth

24   with respect to different positions, but that doesn't go into

25   the analysis that I provided and I testified to.
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1    Q.   Do you have a core understanding that if a secured

2    creditor would receive more in a liquidation, than in a plan or

3    a sale, that that would present a problem for approval of that

4    plan or sale?

5    A.   I know there are many legal issues involved in that

6    determination, but I certainly understand the concept.

7    Q.   Okay.   Now, you agree that your liquidation value is very

8    conservative, right?

9    A.   No, I don't agree with that.

10   Q.   Well, you make an assumption that there is a sale of Jeep

11   Wrangler, right?

12   A.   That is one of the assumptions that we have on liquidation

13   analysis, that's correct.

14   Q.   And is that just Jeep Wrangler, or is that short for all

15   of the Jeep cars?

16   A.   It's Wrangler.

17   Q.   Okay.   So that excludes from your valuation, the Liberty,

18   the Compass Patriot, and the Grand Cherokee Commander, right?

19   A.   That is correct.

20   Q.   Is the Liberty, Compass Patriot, and Grand Cherokee

21   Commander being picked up by New Chrysler?

22   A.   They are, yes.

23   Q.   Okay.   So New Chrysler must think there's some value

24   there, right?

25   A.   Again, you'd have to ask them.   We weren't involved on
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1    their side of the due diligence.

2    Q.   Well, in your expert opinion, do you believe that New

3    Chrysler took the opportunity to assume good assets with value,

4    as opposed to taking on assets that have no value, or have

5    negative value?

6    A.   Again, without knowing what their operating plan is, I

7    don't know what they have in mind for that particular brand,

8    and for those models that you mentioned.

9    Q.   I see.     But you do know that they have the right to

10   produce the Liberty, the Compass Patriot, and the Grand

11   Cherokee Commander, right?

12   A.   That is correct.

13   Q.   But that you don't ascribe any value for the transfer of

14   those assets to New Chrysler, right?

15   A.   Well, you asked me a different question.    In the

16   liquidation context, I don't believe those particular models

17   have a value.    In a going concern context, they may, in fact,

18   have value, but that's not what the liquidation analysis shows

19   with respect to NewCo.     It wasn't valuing anything regarding

20   NewCo.

21   Q.   Well, did you assume that the Jeep Wrangler had a going

22   concern value when you put it in the liquidation analysis?

23   A.   Yes, I did.

24   Q.   And you could've likewise assumed that the Liberty,

25   Compass Patriot, and Grand Cherokee Commander had a going
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1    concern value when you put it in your liquidation, right?

2    A.   No, I couldn't assume that, because those particular

3    brands and models, from a value point of view, based on their

4    earnings results in 2008, and for the average earnings in the

5    prior years, based on the reduction in the SAR level that I

6    testified to earlier, I believe that they do not have value

7    from a liquidation point of view.

8    Q.   Let's try an example.    Somebody might want to actually buy

9    the assets that would allow them to produce Liberty, Compass

10   Patriot, and Grand Cherokee, right?

11   A.   That's possible, yes.

12   Q.   And they might want to provide value for that, right?

13   A.   That's possible, certainly.

14   Q.   And if you sold it, that value would be distributed to the

15   old Chrysler estate, right?

16   A.   That would be correct.

17   Q.   And the first in line to receive the proceeds would be the

18   senior secured lenders, right?

19   A.   I believe that's correct.

20   Q.   And you provided absolutely no valuation --

21            MR. KURTZ:   Well, strike that.

22        You provided no liquidation value for the Dodge truck

23   unit, that includes the Ram, the Titan, Dakota, and the Durango

24   Aspen, right?

25   A.   There are values for those, but those are liquidation
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1    values, not going concern values.

2    Q.   Okay.   And will the new Chrysler continue to produce the

3    Ram, the Titan, Dakota and the Durango Aspen?

4    A.   Again, the same answer as on Jeep.   I don't know if that's

5    the case or not, although I do know they are buying the

6    technology and the platforms for those models.

7    Q.   They're buying the assets necessary to be able to produce

8    and sell those Dodge trucks, right?

9    A.   I believe that's correct.

10   Q.   And therefore, New Chrysler must believe that the right to

11   produce and sell Dodge trucks has a value, right?

12   A.   Again, you'd have to ask them, but I presume that would be

13   correct.

14   Q.   Okay.   And what value did you ascribe to the right to

15   produce and sell those Dodge trucks?

16   A.   We didn't ascribe any going concern value for those

17   particular models.

18   Q.   So that's more value, that if it had been realized,

19   would've gone to the senior secured lenders, right?

20   A.   I'm sorry?

21   Q.   That's more value, that had it been sold and realized,

22   would've been distributed to the senior secure lenders, right?

23   A.   That is correct.

24   Q.   And by the way, the Dodge truck is actually, you know, a

25   highly regarded truck, isn't it?
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1    A.    By, you mean, industry experts?

2    Q.    Correct.

3    A.    It certainly is a truck that is recognized on the

4    marketplace and competes well with others, I believe.

5    Q.    It's award winning, isn't it?

6    A.    I don't know if it is or isn't.

7    Q.    Well, did you think maybe it would be relevant for you to

8    understand if the product was award winning and valuable before

9    you got involved in an exercise where you ascribed no value to

10   it?

11   A.    The value that we ascribed to it was based on a very

12   detailed financial analysis of the various models that you

13   referred to.     It's based upon financial information provided by

14   the company, and based upon that analysis, we determined, in

15   our opinion, was going concern value or liquidation values for

16   the various assets.

17   Q.    Which was zero in this case, right, for those assets?

18   A.    Zero from a going concern point of view, that's correct.

19   Q.    All right.   And by the way, what you relied on is the 2008

20   numbers; is that right?

21   A.    No.   We reviewed information going back to 2005.

22   Q.    Okay.   When you ascribe going concern value, didn't you

23   use 2008 EBITDA?

24   A.    We used that as the indicative value to use for purposes

25   of determining the value from an EBITDA point of view, but we
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1    went back and looked at the financial results, going back to

2    2005 for the particular models that you referenced.

3    Q.   Okay.   So the answer is yes, you used 2008 EBITDA, right?

4    A.   We used 2008 EBITDA for Wrangler, that's correct.

5    Q.   And 2008 was the worst historical year ever in the

6    automotive industry, right?

7    A.   In terms of the ending SAR level, I believe it was

8    probably the lowest SAR level in 30 to 35 years, that's

9    correct.

10   Q.   Okay.   So you chose, not conservatively, you chose the

11   worst possible year to use for calculating value, right?

12   A.   No, I actually didn't, because 2008 is a combination of a

13   very high volume year for the first seven to eight months of

14   2008.   It was only really in the fourth quarter of 2008 that

15   the volumes decreased.

16        So actually the EBITDA that I used could've been

17   dramatically lower if I would have used a running rate analysis

18   for the fourth quarter of 2008.

19   Q.   Okay.

20   A.   But I used the entire year, which gave it a higher

21   valuation.

22   Q.   Well, a higher valuation and you say the running rate, but

23   certainly a lower valuation than had you used 2007, 2006, 2005,

24   or any other year, right?

25   A.   That would be correct for Wrangler.
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1    Q.   Okay.   So you took the lowest year, 2008, right?

2    A.   I took the current year in terms of determining what a

3    value would be, that a buyer would buy from, correct.

4    Q.   By the way, is this the way you participated in

5    negotiations, you used the worst possible years to come up with

6    values or did you actually try to advocate for consideration?

7    A.   I'm sorry, what negotiations are you referring to?

8    Q.   Well, do you ever engage in any negotiations for clients?

9    A.   Routinely, in the restructuring business I'm negotiating

10   for clients, yes.

11   Q.   Okay.   How about here, did you engage in any negotiations

12   with any of the parties that are involved in the 363 sale?

13   A.   Yes, I did.

14   Q.   Okay.   Were you involved in any negotiations about how the

15   value would be distributed or allocated?

16   A.   No.

17   Q.   Let me look at the cars.    You've got under cars, I know

18   Chrysler's got the Challenger, the Charger, the 300, the

19   Sebring and the Avenger, right?

20   A.   I believe that's correct.

21   Q.   And you ascribe no value to those assets, correct?

22   A.   That is correct.

23   Q.   And did the right to produce and sell those cars, is that

24   getting assigned to the New Chrysler?

25   A.   Yes, it is.
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1    Q.   So New Chrysler believes those assets have value also,

2    right?

3    A.   Again, you'd have to check with them.

4    Q.   What about minivan crossover, which is the Caravan, the

5    Town and Country, and the Rutan and the Journey, Chrysler

6    produces those vehicles as well, right?

7    A.   They do.

8    Q.   And you ascribe no value to those assets, right?

9    A.   Again, from a going concern point of view, we ascribe no

10   value given the negative cash flows that they had in 2008,

11   that's correct.

12   Q.   And you gave no value in your liquidation analysis to

13   them, right?

14   A.   We gave value for certain of the plants and the equipment,

15   but not as a going concern.

16   Q.   Okay.   And those minivan crossover vehicles, the right to

17   produce and sell those, those are being sold pursuant to the

18   363 sale to the New Chrysler as well, right?

19   A.   I believe they are.

20   Q.   So again, the New Chrysler believes that that has value,

21   right?

22   A.   Again, you certainly would have to ask them.

23   Q.   You're just uncomfortable making an assumption that when

24   somebody negotiates and arranges for the purchase of assets

25   that, you know, perhaps they think they have value?
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1    A.   I'm certain that a lot of things go into what a buyer

2    looks at in determining what they're paying for, and what

3    values for.    And not having participated on their side, in

4    terms of their due diligence, I don't know they ascribed value

5    to the assets that are being purchased.

6    Q.   Well, you are aware of the whole concept of taking good

7    assets and leaving bad assets behind in a reorganization effort

8    under Chapter 11, right?

9    A.   I have seen that done in certain cases, yes.

10   Q.   In certain cases, you've seen people take good assets and

11   leave bad assets behind?

12   A.   I have seen that, yes.

13   Q.   Have you also been the adviser in cases where people took

14   bad assets and left the good ones behind?

15   A.   Unknowingly, yes.

16   Q.   Yeah.    Was that pursuant to your advice?

17   A.   I'm sorry?

18   Q.   Was that pursuant to your advice?

19   A.   Not as best as I can recollect.

20   Q.   Well, how about if somebody's well advised and they

21   understand the bankruptcy procedures, then they typically take

22   the assets they want, and they leave behind the liabilities

23   that they don't, right?

24   A.   I think that would be a common way to negotiate,

25   certainly.
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1    Q.   Okay.   And so you are certainly comfortable with an

2    understanding that New Chrysler is taking assets that they felt

3    were worthwhile, correct?

4    A.   I would presume in their mind, they did, yes.

5    Q.   And, in fact, they left behind some assets, didn't they?

6    A.   There was certainly assets and liabilities left behind,

7    that's correct.

8    Q.   All right.   Including what, some, eight plants?

9    A.   There are a number of manufacturing facilities as part of

10   the remaining Chrysler to be liquidated, correct.

11   Q.   So what's the value of those eight plants?

12   A.   I'd have to go through them individually in the

13   liquidation analysis, I don't recall off the top of my head,

14   without taking a look at the liquidation analysis.

15   Q.   Sure.

16            MR. CULLEN:    The liquidation analysis?

17            MR. KURTZ:    Just the liquidation analysis.

18            MR. CULLEN:    The most recent one?

19            MR. KURTZ:    Correct.

20            MR. CULLEN:    Is it in the schedule?

21            MR. KURTZ:    If that's his -- if he agrees that's his

22   analysis, that's what I have in mine.

23            THE WITNESS:    Thank you.   Okay.    I have it.

24        (Pause)

25            THE WITNESS:    I have it, yes.
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1    BY MR. KURTZ:

2    Q.   Okay.   And what's the value of the eight plants that are

3    being left behind in Old Chrysler?

4    A.   We ascribed no value to the remaining plants, because when

5    we compared the December 2007 appraisals for these eight plants

6    that you mentioned, and we worked with the company in

7    developing the cost of decommissioning those plants, readying

8    them for sale, the cost of marketing, the cost of safeguarding

9    them, the environmental costs of the various environmental

10   cleanups for those plants, in all cases, over a period of one

11   to two years to dispose of these plants, the values -- the

12   costs were greater than the values in the 12/7 -- December '07

13   appraisal done by Caldwell Banker Richard Ellis.

14   Q.   Okay.   So the short answer to my question is they have

15   zero value, right?

16   A.   Yes, based on the appraisal value, zero value, my opinion.

17   Q.   Are you aware that debtors' counsel advised the District

18   Court in open court yesterday, that those assets were worth as

19   much as one billion dollars?

20   A.   I'm not aware of that, no.

21            MR. CULLEN:    Objection, counsel.    I'm going to object

22   on the point of personal privilege here.      I can point the

23   counsel to the line in the report, misrepresents what I said.

24            MR. KURTZ:    Excuse me, Your Honor, I --

25            THE COURT:    Just a minute, please.    Sir, --
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1                MR. KURTZ:    I'm in the middle of cross-examine.

2                THE COURT:    -- sit down, please.   Thank you.    Just a

3    minute.

4                You're referring to what specific reference made by

5    debtors' counsel in the District Court, and what specific

6    assets?

7                MR. KURTZ:    Yesterday, Your Honor, we got some

8    initial questions from Judge Griesa.       He said, "Is there

9    anything left once there has been a transfer of assets."         I

10   said, "No, there was really nothing.       Substantially all the

11   assets would be gone."      Debtors' counsel said, "That's not

12   true, there's a -- plants."      But I said, "But they don't have

13   value."   The judge said, "Is that true, they don't have value?"

14   Debtors' counsel said, "They are worth as much as one billion

15   dollars."

16               We will be submitting the transcript, in accordance

17   with Your Honor's previous request, and so you'll be able to

18   confirm my account at that time.

19               THE COURT:    All right.   Counsel, go ahead.

20               MR. CULLEN:    If I can direct the Court and counsel to

21   page six of the liquidation analysis, where it says, "Assumed

22   asset sale proceeds."      It has sale of car lines, sales of plant

23   equipment, liquidation of remaining assets.       All of those at --

24   on the low end of the spectrum, is a thousand -- a billion

25   dollars for liquidation of the remaining assets.       Sale of plant
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1    equipment is 597, sale of car lines is 156.    Those were the

2    numbers I was referring the Court to at that time.    I said at

3    sale it can come out to be considerably less, but the values

4    are those.   That's what I said.

5             THE COURT:    All right.   The record is now clear.

6             MR. KURTZ:    And, Your Honor, I feel a little whipped.

7    One court's concern that whether there's value left and I'm

8    hearing it's a billion, and now I'm in a different court where

9    it's no longer good to have additional value left in the old

10   estate, I'm hearing it's zero, it's very difficult.

11            THE COURT:    It is difficult, but that's the price you

12   pay if we're not very specific with the references, and we're

13   talking about the same lines and evaluation, the same

14   terminology, and the same references.

15            MR. KURTZ:    Okay, Your Honor.   But it was Judge

16   Griesa's question, not mine.

17            THE COURT:    It may be, but it's the answer that

18   you're addressing, and it seems to me that you're not

19   addressing the same issue.   But I'll look at the transcript.

20            MR. KURTZ:    Thank you, Judge.

21   BY MR. KURTZ:

22   Q.   Mr. Manzo, you were involved in a decision to hire

23   Greenhill, right?

24   A.   I was involved in that, yes.

25   Q.   And you hold Greenhill in high regard, don't you?
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1    A.   I know they're a fine firm, yes.

2    Q.   Right.    And as of the petition filing date on April 30th,

3    Greenhill had been paid in excess of three million dollars by

4    Chrysler for their work, correct?

5    A.   I believe that's correct.

6    Q.   And you are aware that Greenhill found that your

7    liquidation valuation was “quite conservative,” right?

8    A.   I did see an e-mail to that extent during my deposition.

9    Q.   All right.    And you're aware -- turn to Pensioner Exhibit

10   No. 2 in your binder, please.

11        (Pause)

12   Q.   Is that the e-mail you're referring to?

13        (Pause)

14   A.   I believe that's the one you're referring to, right, yes.

15   Q.   And the e-mail's dated April 15th, right, about two weeks

16   before the filing in this case?

17   A.   That's correct.

18   Q.   And it starts off by saying that the estimated recovery

19   values at the bottom end, "And close to current offer to senior

20   lenders at the top end, significantly above current offers to

21   lenders," right?

22   A.   It does say that, yes.

23   Q.   All right.    That's an observation that the bottom end is

24   close to what's being offered, and the top end is significantly

25   less than what the senior lenders were getting in liquidation,
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1    right?

2    A.   That's the comment that he wrote, that's correct.

3    Q.   But nonetheless, even within that range, they found on the

4    next line, "The overall assumption seemed to be quite

5    conservative," right?

6    A.   That's what is written here, yes.

7    Q.   Perhaps some of the same assumptions that I just covered

8    with you?

9    A.   I have no idea.    I never spoke to him about this e-mail.

10   It was never sent to me.

11   Q.   Okay.   And then your friends at Greenhill concluded by

12   saying, "In general, I would consider the liquidation analysis

13   a bit thin,” right?

14   A.   That's what it says at the bottom of the e-mail.

15   Q.   By the way, the sale as we've already covered to New

16   Chrysler is as a going concern, right?

17   A.   We're selling assets to -- and certain liabilities from

18   Chrysler to NewCo.     What they intend to do with it, I don't

19   know, but I know that's what we're selling to them.

20   Q.   Well, it's being sold on a going concern basis, right?

21   A.   It's being sold to them.    I don't distinguish between a

22   going concern or non-going concern.    They made a bid to

23   purchase certain assets and certain liabilities of Chrysler.

24   Q.   All right.    A going concern is when you continue on in

25   business, right?
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1    A.   Yes.

2    Q.   And the 363 sale contemplates the sale of assets for

3    purposes of continuing on in business, that's why we're all

4    here, right?

5    A.   I suppose that's correct.

6    Q.   If that's not true, say so, because everybody here thinks

7    there's going to be a New Chrysler, right?

8    A.   We'd like to believe there's going to be one, yes.

9    Q.   So that's a going concern basis, right?

10   A.   In that context, I suppose it is.

11   Q.   All right.   It's certainly not being sold on a liquidation

12   basis, right?

13   A.   Again, what they choose to do with these assets once they

14   own them in NewCo, I don't know.   If they intend to operate all

15   of them or liquidate some of them, I don't know.   I'm not

16   involved in the NewCo due diligence or business going forward.

17   Q.   You're aware there's been a lot of arguments made about

18   how great this is for America because it's keeping jobs alive,

19   it's saving the loss of jobs, increasing the tax base, all

20   those types of arguments, that have been made in this court,

21   you're aware of them?

22   A.   Yes, I am aware of those arguments.

23   Q.   Those wouldn't apply if this was a liquidation, right?

24   A.   No, they would not.

25   Q.   If this was a liquidation, then simply the proceeds would
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1    get distributed, in accordance with absolute priority, right?

2    A.   I would assume that would be the case.

3    Q.   To the senior secured lenders, right?

4    A.   Again, depending upon who had liens, and whether they were

5    not good liens, I guess that would be the case.

6    Q.   Okay.   So with respect to the 363 sale on a going concern

7    basis, you have never performed a going concern valuation of

8    those assets, right?

9    A.   That's correct.

10   Q.   And, in fact, to your knowledge, no one has ever tried to

11   determine the going concern value of the assets that are being

12   sold under the 363 motion, right?

13   A.   I know I didn't.

14   Q.   And you're not aware of anyone else who's done that,

15   right?

16   A.   No, I'm not.

17   Q.   I'm going to ask you to turn to Exhibit No. 3 in your

18   binder.   And I'm going to specifically ask you to turn to the

19   third page bearing Bates numbers G152.

20        (Pause)

21   A.   Okay.

22   Q.   All right.   You see this is an e-mail from debtors' lead

23   counsel, correct?

24   A.   That's correct.

25   Q.   And it's dated April 26, 2009 at 4:23 p.m., right?
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1    A.   It is, yes.

2    Q.   And it says in the first paragraph, "So UST, United States

3    Treasury, and Fiat, will have to figure out how we get to 2.6

4    billion, which is one dollar over liquidation value," do you

5    see that?

6    A.   I just have to read it a second.

7         (Pause)

8    A.   Okay.    Yeah, I've read it.

9    Q.   Okay.    So four days before the bankruptcy filing, debtors'

10   counsel was operating under the assumption that liquidation

11   value was 2.6 billion dollars, correct, some 600 million

12   dollars more than was being provided for under the 363 sale of

13   the secured lenders, right?

14               MR. CULLEN:   Objection.    Foundation for -- I don't

15   even think he's established a basis for what debtors' lead

16   counsel thought as of that date, or what she was meaning to

17   express by this note.

18               MR. KURTZ:    Your Honor, foundationally, I assume

19   debtors' counsel will consent to my introduction of this e-mail

20   chain, rather than having to go through the awkward exercise of

21   putting counsel on to authenticate.       Am I correct, counsel?

22        (Pause)

23               MR. CULLEN:   Counsel, Your Honor, my first response

24   to this, is I think that this note, which --

25               THE COURT:    One second.   I need you to get -- I'm
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1    getting communications.    When you speak from there without the

2    benefit of a microphone -- there is a microphone on the table.

3             MR. CULLEN:      Do you mind if I stand beside you here?

4             MR. KURTZ:    Yes.

5             MR. CULLEN:      Sorry.    My first reaction to this is

6    that my view is this note was at the start work product, and is

7    not admissible as such.     We did not produce it, I wouldn't have

8    produced it, quite frankly.        The government produced it.   If I

9    had been given a chance to object, I would've objected on work

10   product grounds.

11            Because I think it goes quintessentially into a

12   rather rough and tumble discussion of legal strategy between

13   counsel for parties with a similar interest.       That's what we

14   were talking about at that time.

15            So I don't think it's admissible.        I don't think it

16   should've been producible, and I don't think it should be used

17   in the way it's being used.

18            I think that inquiry into it, inquiry into it, and

19   inquiry to the lead counsel on that, inevitably, gets into what

20   were you thinking about this, what did you know about that,

21   etcetera, etcetera, etcetera.

22            Ms. Ball is not a percipient witness here.        This is

23   all a juicy higher level gossip sideshow, which has nothing to

24   do with the underlying values, or the sworn testimony, or the

25   analysis we're presenting today.
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1               I can see how objectors' counsel think this is fun.

2    But I don't see is how that it is relevant, percipient witness,

3    percipient testimony in this case.

4               MR. KURTZ:   Your Honor, I don't think any of this is

5    fun.   This is a serious matter, and I'm trying to treat it

6    accordingly.   The notion of work product is remarkable.      We

7    were led to believe that there was some arm's length

8    negotiations with the U.S. Treasury.    This is an e-mail that is

9    arguing about going with the June 15th closing date, which is

10   played so substantially into so many of the decisions in the

11   timing in this case.

12              They certainly don't enjoy work product if they're

13   negotiating at arm's length as they'd have this Court to

14   believe.

15              Second, this was produced, pursuant to an

16   acknowledgement by all parties that there was never a joint

17   defense between the U.S. Treasury and the debtors.

18              So the moment they sent it to a quote "adversary,"

19   and we certainly have questions about that, I could understand

20   why they think they had work product protection, but they

21   don't.

22              As to whether it's juicy gossip or not, I find it to

23   be substantial and important admissions.    There's admissions

24   here that the schedule is a mistake, that it's impossible, that

25   it stuffs the Court, that it risks credibility.    And for
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1    present purposes, there's also an admission that the

2    liquidation value by the counsel that's leading this effort,

3    was determined to be 2.6 billion dollars four days before they

4    filed, with an intent and a plan to provide only two billion

5    dollars to the senior secured lenders.

6               THE COURT:    All right.   Go ahead, ask the witness.

7    BY MR. KURTZ:

8    Q.   We'll go through this quickly now that the cat's out of

9    the bag.

10        You've got a statement by lead counsel here that

11   liquidation value is 2.6 billion dollars, do you see that?

12   A.   I do see that.

13   Q.   And certainly, the -- had you met with lead counsel, from

14   time to time, leading up to the filing of the bankruptcy in

15   this case?

16   A.   Are you referring to Ms. Ball?

17   Q.   I am.

18   A.   Yes, I did.

19   Q.   Okay.   And Ms. Ball was well aware of your work, and your

20   views, and your opinions, right?

21   A.   You'd have to ask her, but I believe she was.

22   Q.   Okay.

23              MR. KURTZ:    Your Honor, I move to introduce the

24   e-mail.

25              MR. CULLEN:   I object, Your Honor, hearsay,
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1    authenticated, irrelevant, work product.

2              MR. KURTZ:    If it's unauthenticated -- excuse me.    If

3    it's unauthenticated, Judge, then I'd call Ms. Ball to the

4    stand.   Then we can find out if it's juicy gossip, or there's

5    some substance.

6              THE COURT:    All right.   Just slow down, counsel.

7              All right.    Does counsel object to the authenticity

8    of the e-mail?

9              MR. CULLEN:    No, not the authenticity.

10             THE COURT:    All right.   Now, as far as work product.

11   Now that it's been produced, what's the basis upon which you

12   argue it's work product and still protected?    You're going to

13   have to, again, either get near the microphone on the table, or

14   a microphone at the podium.

15             MR. CULLEN:    Your Honor, I'm making the distinction

16   here, between a joint defense, which protects attorney-client

17   privilege, and work product privilege, which is -- which

18   protects material that is, one, taps into the mental traces and

19   the strategy of a lawyer, and the view of the strategy of a

20   case, which this is presented as doing, directly.

21             And, number two, is shared under circumstances, such

22   that it was not meant to, it was not broadcast to the public.

23   It was meant to be a confidential communication.     It may not be

24   an attorney-client, or a joint work -- or a joint defense

25   communication, but nonetheless, it was a communication about
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1    strategy in an upcoming legal case, which taps into the mental

2    traces of the lawyer, and which is meant for no other purpose

3    than to get behind that lawyer's thinking and introduce it.

4                The question is whether or not we have somehow waived

5    work product privilege, by stating these views to a party who

6    would've been supporting the sale the same way we would've been

7    supporting the sale, and to the main lawyer for that party.

8                I submit that an e-mail in those circumstances is not

9    a waiver of work product privilege.     So that would be my

10   argument.

11               THE COURT:   All right.   Counsel, your response?

12               MR. KURTZ:   Your Honor, I'll just repeat again.    That

13   if you want work product protection, you've got to afford

14   yourself work product protection by taking adequate steps to

15   ensure that you have confidentiality with respect to any

16   recipient in the e-mail.

17               You have the Treasury Department here, who does not

18   agree it was confidential.     You have the Treasury Department

19   here that has produced it.     You have the Treasury Department

20   who has confirmed there's no joint defense, and so there's no

21   reason to believe that you could share your thoughts, and it

22   wouldn't be produced.

23               And, in addition, it goes, obviously, to points of

24   negotiation between the debtors and the U.S. Treasury, where

25   the debtors were saying, what a big mistake it was, what a
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1    stuff it was to try to get this moving forward on a 6/15, a

2    June 15th close, when that was a mistake.           That was a matter of

3    debate.       Of course, the debtors lost that one.

4                  Judge, I think that, you know, there's an awful lot

5    of protest for a document that has been circulating for days

6    now.    It's been part of papers that have been filed in District

7    Court.    There was no application to have those removed.        There

8    was no notion of this yesterday when it was addressed.          It's

9    waived, if it ever existed, and it never did exist.

10                 THE COURT:   All right.   I'll overrule the objection,

11   so admitted.      How is it identified?

12                 MR. KURTZ:   Pensioner Exhibit No. 3, Judge.

13                 THE COURT:   All right.   Go ahead.

14   (Pensioner Exhibit No. 3 was hereby received into evidence as

15   of this date.)

16   BY MR. KURTZ:

17   Q.     All right.    Mr. Manzo, can I have you turn to Exhibit

18   Number 4 now?

19   A.     Yes.

20   Q.     That's the -- that's a draft of the Greenhill fairness

21   opinion, right?

22   A.     It's marked a draft in the upper left-hand corner, so I

23   assume it is a draft, yes.

24   Q.     Okay.    And it also has a date of April 16th, two weeks

25   before the bankruptcy filing, right?
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1    A.   I believe that's correct.

2    Q.   Can I have you turn to internal page number 40?

3    A.   Yes, I have it.

4    Q.   And that reflects a comparable company's analysis,

5    valuation, that was performed by Greenhill, right?

6    A.   I'm sorry, if you have a clearer copy, I have a very

7    difficult time reading the copy that I have?

8    Q.   Okay.   I think I have the same copy as you.      Can you hold

9    it up so I can see if there's some difference?

10              MR. KURTZ:    May I approach, Your Honor?

11              THE COURT:    Go ahead.

12              THE WITNESS:    Some of the numbers are just not that

13   legible.

14   BY MR. KURTZ:

15   Q.   To move through this, I'm going to represent to you

16   certain numbers in here, and I'd just ask you to comment on

17   that.   Your counsel has his own copy.    If he doesn't agree with

18   the numbers, he can say so.     In addition the document will be

19   in evidence, and it can confirm the content.

20              MR. CULLEN:    How much -- just a moment?

21              MR. KURTZ:    Is your copy any better, Mr. Cullen?

22              MR. CULLEN:    My copy is not any better) but I can

23   read some of the words, but I can read next to none of the

24   numbers.

25              MR. KURTZ:    Yeah, let me see your page 40.
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                              CHRYSLER LLC, et al.

1           (Pause)

2               MR. CULLEN:    While we're at somewhat of a standstill,

3    I'd ask counsel to lay a foundation for this familiarity with

4    this draft.      I'm sorry.

5               THE COURT:    Just use the one on the table.

6               MR. CULLEN:    I would object to foundation here until

7    we establish that this witness has familiarity with this draft.

8               MR. KURTZ:    Your Honor, I intend simply to show the

9    witness the information and then have him compare that with

10   the -- his own analysis, whether he's familiar with this one or

11   not.

12              I'm attempting to show that there had been valuations

13   that had been provided by, you know, at least indications of

14   value by debtors' counsel in an e-mail, in open court, and now

15   Greenhill, that are fundamentally different with his own.       He

16   does not have to agree with Greenhill, but I'm going to make

17   him aware of it.

18              THE COURT:    All right.    You can tell him the numbers,

19   if --

20              MR. KURTZ:    Okay.

21              THE COURT:    -- you can read them.

22   BY MR. KURTZ:

23   Q.     Okay.   Now, what were the multiples that you used at the

24   high end on your liquidation analysis for the car lines that

25   were going to be sold?        Was it one to one and a half times?
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                            CHRYSLER LLC, et al.

1    A.   I'm just going to take a look at the exhibit.

2         (Pause)

3    A.   Yes, for Jeep one to one and a half times on the range.

4    Q.   Okay.   And I'm going to represent to you that Greenhill

5    used five turns and five and a half turns in their base case.

6         By the way, can you identify any car company that has ever

7    sold at a multiple of one to one and a half?

8    A.   Car company that was sold?

9    Q.   Correct.

10   A.   No.

11   Q.   How about, can you identify for me any OES company that's

12   ever sold at a multiple of one to one and a half?

13   A.   A what company?

14   Q.   An OES.

15   A.   I'm not familiar with OES.

16        (Pause)

17   Q.   I'm sorry, an OEM.

18   A.   In the automotive business?

19   Q.   Correct.

20   A.   I'm not aware that any domestic car companies that are OEM

21   in the United States have been sold at these levels.

22   Q.   Okay.   Can you identify any automotive or OEM sale at any

23   multiple?

24   A.   No.

25   Q.   And the implied equity value -- I'm sorry, the implied
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1    enterprise value calculated by Greenhill in the base case was

2    between a low of 19.6 billion and a high of 20. -- 21.5

3    billion, which is multiples higher than the valuation that

4    you've proffered, right?

5    A.   Again, I don't know.   If the numbers you're reading from

6    this chart, I can't see those numbers, I would just point out

7    that --

8    Q.   Well, you don't have to point out anything.   I'm just

9    saying that's multiples higher than yours, if I'm read them

10   correctly, right?

11   A.   That would be correct, if you've read them correctly.

12   Q.   Which would've been more than adequate to pay in full the

13   senior secured creditors and still leave value for the estate,

14   right?

15   A.   I'm sorry, what would've?

16   Q.   That would be more than sufficient to pay the senior

17   secured lenders in full and leave additional value for the

18   estate, right?

19   A.   On what EBITDA, are you referring to?

20   Q.   I'm referring to the Greenhill analysis and their

21   determination that the enterprise value was between 19.6 and

22   21.5 billion.    The math is simple, right?

23   A.   You're saying these would be in excess of the secured debt

24   outstanding in Chrysler?

25   Q.   Correct.
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1    A.   That would be correct.

2    Q.   And then there's also a series of synergy valuations to

3    the right, correct?

4    A.   It looks like that's the caption on the two columns to the

5    right.

6    Q.   And then that could add up to as much as another 6.8

7    billion in accrued value, right?

8    A.   If that's a number you can read, I can't see that from

9    this chart.

10   Q.   Okay.    And these financial experts that you were involved

11   in hiring and have great regard for, have had in their fairness

12   opinion two weeks before this filing, valuations of these

13   assets that were multiples higher than yours, right?

14   A.   The two analyses are completely different.     This analysis

15   is a going concern analysis, if I understand you correctly,

16   which presumes that the company has adequate financing and

17   liquidity, to run a business.    I don't know what other

18   assumptions are included, but certainly it would include that.

19   Q.   Okay.

20   A.   The liquidation analysis assumes exactly that, that it is

21   a liquidation, that there is not adequate financing or capital

22   to run the company, which is the reason for why the valuation

23   and the multiples are dramatically lower.      Two different

24   valuations.

25   Q.   But you understand the Greenhill's going concern valuation
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1    was between 19.6 and 21.5 billion dollars, right?

2    A.     That's what you stated, correct.

3    Q.     By the way, are you at all troubled by the fact that that

4    going concern valuation was deleted from the final fairness

5    opinion just days before this filing?

6    A.     I wasn't aware of it, and I'm not troubled by it either

7    way.

8    Q.     I wouldn't expect you to be.

9               MR. CULLEN:      Objection, Your Honor.

10              THE COURT:    Be careful.

11              MR. KURTZ:    Sorry, Your Honor.

12   BY MR. KURTZ:

13   Q.     And I'll have you turn to the next exhibit, and can you

14   tell me whether this is either the -- what do you have as

15   Exhibit Number 5 there, sir?       Is it the Chrysler breakup

16   valuation?

17   A.     That's what it's labeled, yes.

18   Q.     If you turn --

19              MR. KURTZ:    And that's Exhibit 5, Your Honor.

20   Q.     I'm going to have you turn to page three of that breakup

21   valuation by Chrysler and Cerberus pursuant to prior testimony.

22   A.     Okay.   I have it.

23   Q.     Do you see that valuation had a conclusion that the going

24   concern value of Chrysler in the base case was 17.2 billion,

25   which was reasonably close to Greenhill's number in April,
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1    right?

2    A.   Yes, I see the 17.2 billion listed as total asset value.

3    Q.   Right.   And the Chrysler/Cerberus valuation also had a

4    going concern value as high as 25.7 billion which was even

5    higher than the Greenhill number, right?

6    A.   I do see the 25.7 here.

7    Q.   Okay.    Now, let me change subjects to the government's

8    role in the negotiations.    Let's start with Fiat.   The Treasury

9    Department required Chrysler to form an alliance with Fiat,

10   right?

11   A.   No.   Not that I'm aware of.

12   Q.   Well, Chrysler management had determined that a stand-

13   alone plan was the best option, right?

14   A.   That is correct.

15   Q.   And you had decided that a merger with GM was the best

16   option, right?

17   A.   I believed that the transaction with GM would produce a

18   superior value than a Chrysler stand-alone option, that's

19   correct.

20   Q.   Okay.    But the Treasury Department wanted the company to

21   go forward with Fiat, right?

22   A.   No, I'm not aware of that.     What I'm aware of is that the

23   Treasury Automotive Task Force concluded that the Chrysler

24   stand-alone plan that was submitted to the task force in

25   February of 2009 was deemed not to be a viable plan by the
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1    Automotive Task Force.

2    Q.   In other words, the Treasury Department overruled the

3    Chrysler Board of Directors' and senior management's analysis

4    and opinion that there should be a stand-alone plan, right?

5    A.   Yeah, they disagreed with the conclusion that --

6    Q.   Well, they did more than disagree, right, they said no?

7                MR. CULLEN:   Objection, Your Honor.

8                THE COURT:    All right.   Let the witness finish the

9    question.

10   BY MR. KURTZ:

11   Q.   Okay.    They did more than disagree, sir, right?

12   A.   They disagreed with the conclusion that Chrysler was

13   viable as a stand-alone, and opted not to provide financing to

14   Chrysler as a stand-alone company.

15   Q.   Which dictated the results, correct?

16   A.   Which dictated that Chrysler had to embark on another

17   option.

18   Q.   A transaction with Fiat, right?

19   A.   Fiat or any other third party.

20   Q.   All right.    And the Treasury Department handled the

21   negotiations of Fiat, right?

22   A.   No.    The negotiations with Fiat regarding the terms and

23   conditions of a term sheet and an indicative letter of intent,

24   were negotiated by Chrysler.

25   Q.   Who determined if Fiat would receive up to thirty-five
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1    percent of New Chrysler?

2    A.   There was a myriad of discussions with representatives

3    from Fiat and from Chrysler that culminated in a term sheet

4    that set forth various equity percentages.

5    Q.   And so how did Chrysler value the Fiat contribution?

6    A.   It was a negotiation.   I don't know that I ever saw a hard

7    and fast analysis of calculations of valuation given by Fiat.

8    There were certainly analysis of assets to be contributed by

9    Fiat that were taken into consideration.

10   Q.   Well, wait a minute.    New Chrysler is going to be owned in

11   part by the union, fifty-five percent, right?

12   A.   That is correct.

13   Q.   And it's going to be owned as much as thirty-five percent

14   by Fiat, right?

15   A.   As I understand that, ultimately up to thirty-five

16   percent, that's correct.

17   Q.   And there's going to be a transfer of the Old Chrysler

18   assets into New Chrysler, right?

19   A.   That's correct.

20   Q.   And then there's going to be a transfer of some

21   intellectual property by Fiat, right?

22   A.   Yes, and obviously a bunch of assumed liabilities that are

23   being assumed by NewCo from Chrysler.

24   Q.   Okay.   But, in any event, in order to properly determine

25   how to allocate the equity, you'd have to value the asset, the
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1    contributions of the new entity, right?

2    A.   That's a way to do it.

3    Q.   Well, is that the traditional way to do it?     You figure

4    out, well, I put in something worth ten dollars, you put in

5    something worth ten dollars, we'll go fifty/fifty, is that sort

6    of a traditional model?

7    A.   That's a way of doing it.     I've seen negotiations over the

8    years include many methodologies, not including at all what's

9    being contributed in terms of hard assets.

10   Q.   Okay.   But the estate agreed that New Chrysler would

11   receive up to thirty-five percent of the new equity without

12   even having bothered to actually value the Fiat intellectual

13   property contribution, correct?

14   A.   I'm sorry, can you repeat that question?

15   Q.   Yeah.

16            MR. CULLEN:      Judge?

17   Q.   The question is --

18            THE COURT:    One second, what's the objection?

19            MR. CULLEN:      The objection is foundation, because at

20   the time of those negotiations there was no estate.

21            THE COURT:    At what point of reference are you

22   talking about, pre-petition, correct?

23            MR. KURTZ:    Well, Your Honor, what I'm trying to

24   understand, my point is, that there's assets being transferred

25   over to New Chrysler, and there are assets being -- from the
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1    estate and there are assets being transferred over from Fiat.

2    And that you need to have an understanding what the value is of

3    Fiat's contribution to know whether they are entitled to

4    receive thirty-five percent of the equity, or whether they're,

5    in fact, receiving a distribution of value that, in fact,

6    belonged to Old Chrysler.     Because it was attributable to the

7    Chrysler contribution to New Chrysler, and not the Fiat

8    contribution to New Chrysler.

9                THE COURT:   Well, I understand what you're trying to

10   establish, but when you're asking the witness a question, you

11   are asking him, did -- you're asking him, did Chrysler do an

12   evaluation of the asset contributed --

13               MR. KURTZ:   Contributed by Fiat.

14               THE COURT:   -- by Fiat?

15               MR. KURTZ:   That is correct, Judge.

16               THE COURT:   And the witness can answer that question.

17   BY MR. KURTZ:

18   A.   Yes.    Chrysler certainly undertook to understand the

19   specific intellectual assets being contributed by Fiat.

20   Q.   Okay.    But I didn't ask you whether you undertook to

21   understand, whatever that means.

22        I asked you whether Chrysler performed a valuation of the

23   Fiat contribution before agreeing to a thirty-five percent

24   equity take?

25   A.   It was part of the negotiation, but it wasn't a --
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1    Q.   Sir, do you --

2    A.   -- mathematical calculation that was performed to try to

3    allocate assets contributed to intellectual assets contributed,

4    and then do a calculation of respective ownership positions, it

5    wasn't like that.

6    Q.   Do you know what a valuation is?

7    A.   What type of valuation?

8    Q.   Are you a valuation expert?

9    A.   I have done valuations, yes.

10   Q.   So you know what a valuation is?

11   A.   Depends on what type of valuation you're referring to.     A

12   liquidation analysis, a discounted cash flow, it depends which

13   one you're referring to.

14   Q.   Aren't they all valuations?

15   A.   They are types of valuations.

16   Q.   Okay.   So did Chrysler perform a valuation of some kind, a

17   recognized valuation, of the Fiat contribution to New Chrysler,

18   did you do that?

19   A.   I don't know.    What do you mean, recognized valuation?

20   Are you talking about intellectual --

21   Q.   Well, I don't want you to make it up on the stand, I want

22   something that's recognized.

23            THE COURT:    Just a minute, Mr. Kurtz.   You'll get to

24   ask your questions, but you're just going to do them in a more

25   polite manner.   Finish your response.
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1             THE WITNESS:    Thank you, Your Honor.

2    BY MR. KURTZ:

3    A.   I have seen intellectual valuations done by intellectual

4    expert valuation firms that are quite detailed.       Chrysler did

5    not undertake to hire an intellectual valuation firm to do a

6    valuation.    So I don't know if you're speaking with respect to

7    a formal valuation by a third party expert on intellectual

8    property, or are you asking whether or not the management of

9    Chrysler evaluated the intellectual property being contributed

10   by Fiat to determine whether the alliance made sense.      They did

11   the latter.

12   Q.   Well, let's start with did anyone from Chrysler hire a

13   third party expert to actually value the intellectual property

14   that was being transferred by Fiat?

15   A.   Not that I'm aware of.

16   Q.   Did Chrysler perform some valuation, where we could find

17   the document that says, this is a valuation of Fiat's assets,

18   and we could look at it?

19   A.   I believe that people in Chrysler did look at potential

20   values of the intellectual property being contributed by Fiat.

21   Q.   Okay.    And what number did you come up with?

22   A    I wasn't involved in the intellectual valuation of that,

23   nor do I recall seeing one.

24   Q.   Have you ever seen -- well, in the first place, a

25   valuation will typically then tell you what the value is,
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1    right?

2    A.   That would be correct.

3    Q.   That'd be the whole point of a valuation, right?

4    A.   Normally, that's correct.

5    Q.   So if you see a document that tells -- that analyzes and

6    concludes the value of the -- with, you know, numerically the

7    value of the Fiat contribution into New Chrysler?

8    A.   I'm sorry, was that a question?

9    Q.   That was a question.

10   A.   I'm sorry, would you mind just repeating it?

11   Q.   Yeah.   Have you seen -- really, I mean, have you just seen

12   a valuation of the intellectual property being contributed by

13   Fiat to New Chrysler, a document that puts a number on it?

14   A.   No, I have not.

15   Q.   Okay.   That wasn't so hard.

16              MR. CULLEN:   Objection, Your Honor.

17              THE COURT:    You have to be near that microphone.

18              MR. CULLEN:   My objection is two-fold.   One is to the

19   mode of questioning, which is at this point repetitive and

20   abusive.

21              And second, is based upon our attempt to respond to

22   the fifty-six 30(b)(6) notices that White & Case put out for

23   discovery.   We assigned people to nearly fifty of those.

24              In the depositions of all of our people, including

25   the ones designated for the 30 -- on the 30(b)(6) topics, not
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1    one of those 36 -- 30(b)(6) topics was brought up or referenced

2    in the deposition, nor did counsel bother to question on those

3    topics.   If they had bothered to follow-up --

4              MR. KURTZ:    Your Honor, I'm going to object to the

5    testimony that counsel is about to give.

6              MR. CULLEN:   -- on the 30(b)(6) topics, --

7              THE COURT:    Just a minute.   Let me -- just wait.

8              MR. CULLEN:    If they had bothered, they would've

9    found that the witness we proffered on the 30(b)(6) topic of

10   the valuation of the Fiat technology input, was the witness who

11   has just left the courthouse, Mr. LaSorda.

12             So while I recognize that this is cross-examination

13   and that Mr. Kurtz has his latitude and has his theory, I feel

14   that both the witness and the Court's time are being abused by

15   this mode of proceeding.

16             MR. KURTZ:    Your Honor, it seems to me that every

17   time we get to anything that is harmful to the debtors' case, I

18   get a speech.    I am not familiar with an objection to cross-

19   examination, which allows counsel to get up and talk about

20   discovery and what witnesses might have said what.      I'm

21   entitled to ask questions of the value of the financial expert

22   here, as to what he knows about these subjects, and he has now

23   answered that.

24             THE COURT:    He has answered.

25             MR. KURTZ:    Correct.   So there wasn't a question
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1    pending, so may I proceed?

2             THE COURT:    Go ahead.    And, Mr. Bienenstock, are you

3    standing there for a reason?

4             MR. BIENENSTOCK:    Yes, Your Honor.   I was going to

5    object to the line of questioning for another reason.    But if

6    counsel is going to move on to something else, I won't take the

7    time.

8             THE COURT:    Thank you.

9    BY MR. KURTZ:

10   Q.   Can you turn to Pensioner Exhibit Number 6 now?

11   A.   Sure.

12        (Pause)

13   Q.   This is an e-mail chain between March 24th and March 25th

14   of this year, right?

15   A.   I'm just reading it.    One second.

16        (Pause)

17   A.   Okay.   Yes, I've read it.

18   Q.   Okay.   It starts with Mr. LaSorda asked you how you're

19   doing, and advising you he's still up at 11:00, right?

20   A.   I'm sorry, to who?

21            MR. CULLEN:    I beg your pardon?

22            MR. KURTZ:    I'm sorry.

23            THE WITNESS:     That's okay.

24   BY MR. KURTZ:

25   Q.   It starts with Mr. LaSorda asking Mr. Kolka how he's doing
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1    and if he's up at 11:00, right?

2    A.   That is correct.

3    Q.   And Mr. Kolka responds the next morning at 7:00, correct,

4    7:13?

5    A.   That is correct.

6    Q.   And he copies you, right?

7    A.   That's correct.

8    Q.   And he's reporting, right?

9    A.   I'm sorry, he's what?

10   Q.   He's reporting about a meeting, right?

11   A.   I don't know if it's about a meeting, he doesn't reference

12   a meeting.

13   Q.   Well, when he said in an e-mail that was sent to you,

14   "Cerberus and us were told how this will play out."   Did you

15   understand that they had been told by the Treasury how the

16   following subjects would be played out?

17   A.   No, I didn't understand that.

18   Q.   So who is telling Cerberus and Chrysler how this would

19   play out?    Who is that party?

20   A.   I don't know, it doesn't say who the party is in the

21   e-mail.

22   Q.   Well, the Treasury had a pretty significant role in this

23   case, right?

24   A.   The Treasury is one of our lead lenders, yes.

25   Q.   Is there anyone else who could be telling Cerberus and
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1    Chrysler how this was going to play out?

2    A.    Again, you'd have to ask Mr. Kolka, I don't know.

3    Q.    I'm asking you.   Is there anybody in this process that

4    could have dictated to Cerberus and Chrysler how this would

5    play out, other than the United States Department of Treasury?

6    A.    I'll be candid with you, there wasn't anybody who dictated

7    to Chrysler how this would play out in the transaction that

8    I've been involved in for the past six months.

9    Q.    Okay.   But work with me on the e-mail.   It says to you, it

10   says, "Cerberus and us were told how this will play out."       So

11   let's assume that you were accurately told that Cerberus and

12   Chrysler were told how this would play out.

13         Now, using your experience in connection with this matter,

14   who could that have been?

15   A.    I have no idea who --

16   Q.    Well, could a dealer have told Cerberus and Chrysler how

17   this was going to work out?

18   A.    I'm not going to speculate and try to guess who the party

19   is.

20   Q.    Could a parts supplier have dictated to Chrysler and

21   Cerberus how this transaction was going to play out?

22   A.    I really cannot speculate.   I can't really tell who the

23   party is from this e-mail.

24   Q.    Putting aside the U.S. Treasury, could anybody have

25   dictated to Chrysler and Cerberus how this was going to play
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1    out?

2                MR. CULLEN:   Objection, Your Honor, he's already

3    rejected the term dictate with respect to any party.

4                THE COURT:    That is accurate.

5                MR. KURTZ:    Okay.

6    Q.     Putting aside the U.S. Treasury, was there anybody else

7    who could have told Cerberus and Chrysler quote, how this will

8    play out?

9    A.     There could be a number of parties here who are critical

10   to consummating a transaction.

11   Q.     Okay.   Who is that?

12   A.     One could be Fiat, one could be FinCo, one could be the

13   lender to NewCo, the U.S. Treasury, there could be a number of

14   different parties.

15   Q.     I'm sorry, the first one was Fiat and then who?

16   A.     FinCo, Chrysler Financial.

17   Q.     FinCo, okay.   And who else could it have been?

18   A.     The lender to NewCo.

19   Q.     Okay.   Let's go down to the bullet points.   The first one

20   says, "We need to deal with Fiat today.       That will likely be

21   done.    We were told to pretty much take it."

22          Could Fiat have told Chrysler that they had to take the

23   deal?

24   A.     They certainly could have intimated that if you don't take

25   this deal, we're taking it off the table, yeah, absolutely.
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                             CHRYSLER LLC, et al.

1    Q.   Did that happen?

2    A.   I don't know if that happened.   That wasn't part of that

3    discussion in this e-mail.

4    Q.   Could FinCo have told Cerberus and Chrysler that they had

5    to take the deal?

6    A.   Certainly, they're a major financing party to Chrysler.

7    Q.   Okay.   Do you recall FinCo ever doing that?

8    A.   I've never been involved in discussions directly with

9    FinCo.

10   Q.   By the way, FinCo's a wholly owned subsidiary of Cerberus,

11   right?

12   A.   I don't know legally how that legal structure works.

13   Although I know Cerberus is a principal owner of Chrysler

14   Financial.

15   Q.   Okay.   So could the subsidiary to Cerberus have told them

16   how they had to proceed, how this would play out?

17   A.   I'm sorry, can you ask that one more time?

18   Q.   Yeah.   Do you believe that a subsidiary of Cerberus could

19   have told Cerberus how this was going to play out?

20   A.   Again, you'd have to ask them.   FinCo has, I understand

21   it, an independent board, has a different lender group.     I

22   don't know what the considerations of Chrysler Financial are as

23   it looked at a Fiat transaction.

24   Q.   Okay.   And could the lender to New Chrysler have said that

25   Chrysler and Cerberus had to take the Fiat deal today?
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                            CHRYSLER LLC, et al.

1    A.   Certainly lenders, financing and buying restructured

2    companies have a tremendous amount of clout in consummation of

3    the transaction by their financing terms, to the third-party

4    purchaser.

5    Q.   So a third party --

6    A.   So, that certainly could have happened.

7    Q.   Okay.   The third-party lender comes in and says, "We need

8    a deal with Fiat today, that will likely be done, we were told

9    to pretty much take it."   That's how your understanding of

10   third-party lenders' behavior?

11   A.   I've seen many third-party lenders have more influence

12   over a transaction in a restructured company than oftentimes

13   third-party purchasers themselves.

14   Q.   And who's the third-party lender here?

15   A.   It's the U.S. Treasury.

16   Q.   Ah, maybe I'm agreeing with you now.

17        So I'll go with you on that one, the U.S. Treasury could

18   have dictated this.

19        Let's look at the second one.   "They will call the union

20   in and tell them to accept the VEBA deal from us."

21        Could Fiat have been dictating that?

22   A.   I have no idea.   Fiat was intimately involved in

23   negotiations with the UAW on all terms of the UAW in the VEBA

24   negotiations.

25   Q.   Who negotiated with the unions on the terms of the VEBA
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                            CHRYSLER LLC, et al.

1    deal?

2    A.   Fiat directly.

3    Q.   Okay.   And it says 4, "We'll do a 363 and then tell the

4    banks here's the deal, take it or liquidate."     Is that Fiat

5    that's saying that?

6    A.   Again, I don't know who Mr. Kolka's referencing in number

7    4.

8    Q.   All right.   Now, Treasury is the one that conceived the

9    363 strategy, right?

10   A.   I have no idea when they thought about it.    I can tell you

11   that we certainly discussed it within Chrysler on a number of

12   occasions.

13   Q.   Are you aware that Treasury conceived the 363 sale

14   concept?

15   A.   I'm not aware that they conceived it, no.

16   Q.   All right.   Are you aware that Treasury was negotiating

17   directly with the banks?

18   A.   I am aware of that, yes.

19   Q.   And you're aware that Treasury was taking the position

20   that the banks could take it or leave it, right?    Are you aware

21   of that?

22   A.   I am aware of that.

23   Q.   Okay.

24   A.   I am aware of that.

25   Q.   Okay.   So does that sound like Treasury then, making the
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                             CHRYSLER LLC, et al.

1    statement, tell the banks, here's the deal, take it or

2    liquidate?    Does that sound like Treasury?

3    A.   Could be Fiat, could be Treasury, could be FinCo, could be

4    a number of parties.

5    Q.   Can you produce any document from Fiat that ever speaks in

6    terms of take the deal or liquidate it to the banks?

7    A.   I've never seen that in writing, no.

8    Q.   Were you ever involved in a discussion where Fiat said,

9    the banks should take the deal or liquidate?

10   A.   No.   But I was involved in a number of discussions with

11   Fiat, where they actually thought the banks should forgive all

12   of their indebtedness, and convert all of it into equity, on a

13   number of occasions.

14   Q.   My question is whether you ever heard Fiat say words to

15   this effect, "tell the banks here's the deal, take it or

16   liquidate"?

17   A.   No, not that I recall.

18   Q.   But you have heard the Treasury Department use words like

19   that, right, "tell the banks here's the deal, take it or

20   liquidate"?

21   A.   Yes, I have.

22   Q.   Does that help refresh you or

23              MR. KURTZ:   Strike that.

24   Q.   Does that help you understand that the e-mail that you

25   received was reporting on what the Treasury Department said was
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1    how this was going to be played out?

2    A.   It doesn't actually add to my understanding of Mr. Kolka's

3    e-mail.

4    Q.   All right.    Let me ask you to turn to the Pensioner

5    Exhibit number 7.

6    A.   Okay.

7    Q.   Okay.   Brian Aronson is someone who works at your firm,

8    Capstone, right?

9    A.   Yes.    He's an employee of Capstone.

10   Q.   Do you know what his title is?

11   A.   I believe he's a manager.

12   Q.   And you're aware that KPMG is Chrysler's auditors, right?

13   A.   I am.

14   Q.   And Mr. Aronson and Capstone wrote this e-mail reporting

15   about a meeting that he had with KPMG, right?

16   A.   I have to read that.    I've not seen this e-mail before.

17   Q.   Take a look at it.

18        (Pause)

19   A.   Okay.   I've read it.

20   Q.   Okay.   Is it fair to say that Capstone had serious

21   reservations about a transaction with Fiat?

22   A.   I don't conclude that from this e-mail.

23   Q.   Okay.   Let me direct your attention to the second bullet

24   point, "KPMG concludes that there may be around half of

25   eighteen billion of off balance sheet obligations which are not
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1    transparent.    This is consistent with Greenhill's ten million

2    estimate."    Do you see that?

3    A.   I do see that.

4    Q.   All right.    Now, companies often use off balance sheet

5    obligations to hide liabilities, right?

6    A.   To hide liabilities?

7    Q.   Correct.

8    A.   I don't refer to it in that vein, no.

9    Q.   Okay.    Well, are you familiar that there are companies

10   that have used off balance sheet treatment of liabilities, as a

11   way to commit fraud, like maybe Enron?

12   A.   Yes, I'd say that's the assertion in Enron.

13   Q.   Okay.    And would you agree that off balance sheet

14   treatment of between nine and ten billion euros of liability,

15   could raise some red flags about going forward with Fiat?

16   A.   It would be certainly something that one would look into,

17   I would think.

18   Q.   Let me ask you to turn to page -- the second bullet point

19   on page two, says, "KPMG gives Fiat a low score with regard to

20   clarity of reporting; namely one, lack of warranty disclosure;

21   two, lack of sales allowance and incentives disclosure; three,

22   JV investment information; four, lack of segment balance

23   sheet," right?

24   A.   That's what the words say, yes.

25   Q.   Right.    And then "the team agreed that the points to
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1    Nardelli are," do you see that section?

2    A.     I do.

3    Q.     All right.   And the first point is -- well, let's go to

4    the third point first, "off balance sheet investments in JVs

5    without full disclosure is an economic risk and a political

6    risk.    How could the Treasury/Chrysler get in bed with a shady

7    partner?"      Do you see that?

8    A.     I do.

9    Q.     Do you think that could be fairly characterized as a

10   concern about the alliance of Fiat, calling them a shady

11   partner, and questioning how our government and Chrysler could

12   possibly get in bed with them?

13   A.     Certainly something that I would have to inquire into,

14   yes.

15   Q.     Did you do so?

16   A.     I've never seen this e-mail until you just showed it to

17   me.

18   Q.     So you certainly haven't inquired about any of that,

19   right?

20   A.     No, I have not.

21   Q.     By the way, if you go back to the first page.   The third

22   bullet points says, "KPMG points out that many of their eighty-

23   three industrial JVs are in high risk corruption countries,"

24   right, such as Brazil?

25   A.     Yes, I see that reference.
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1    Q.   That presents risks as well, doesn't it?

2    A.   It might to an auditor like KPMG --

3    Q.   Right.

4    A.   -- it's part of due diligence that I think people would

5    typically look at when dealing with multi-national companies

6    like Fiat.    This is not unique.

7    Q.   Yeah, right.    I mean, an auditor's job is to ensure that

8    you have transparent and accurate reporting, so people don't

9    mistake the numbers, commit fraud or other misconduct, right?

10   A.   That is correct.

11   Q.   And so KPMG, in doing its due diligence, reached a

12   conclusion that there was real concerns about Fiat, as a shady

13   partner, that they were shocked.

14   A.   I don't think KPMG said that from this e-mail.

15   Q.   Okay.    Well, your partner, right?

16   A.   I'm sorry?

17   Q.   Is he a partner, Brian Aronson, does he have equity in

18   Capstone?

19   A.   No, he does not.

20   Q.   All right.    Well anyway, Brian Aronson from your firm

21   said, "How could the Treasury/Chrysler get in bed with a shady

22   partner?"    That's what he said, right?

23   A.   That's what it says, yes.

24   Q.   All right.    Now, it was the government, the Treasury

25   Department that decided that the unions would receive fifty-
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1    five percent of the equity, right?

2    A.    I believe in that negotiation, that's correct.

3    Q.    And the Treasury Department also handled the negotiations

4    with the secured lenders, right?

5    A.    Yes, I believe that's correct.

6    Q.    And, in fact, the Treasury Department controlled whether

7    the debtors could resolve the dispute with the nonconsenting

8    senior secured lenders, right?

9    A.    I'm sorry, say that one again?

10   Q.    Yes.    The Treasury Department controlled whether the

11   debtors could resolve the dispute with these nonconsenting

12   senior secured lenders, like the Indiana pensioners, right?

13   A.    I'm not aware of that.

14   Q.    Okay.    Well then, let's turn to Pensioner Exhibit number

15   8.    Take a second and read it.

16         (Pause)

17   A.    Yes, I've read it.

18                MR. KURTZ:   By the way, Your Honor, see if this

19   refreshes the witness.      I'm going to read into the record from

20   Mr. Kolka's deposition on May 24, 2009, at least on the copy

21   that we have, which is most likely rough, page 53.      Counsel,

22   you can read over my shoulder if you want.       I was just handed

23   this.   Page 53, line 25.

24   "Q.   All right.    In looking at the e-mail, item number one,

25   when you say ‘we need a deal with Fiat today, that will likely
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1    be done.      We were told to pretty much take it,' who told you

2    that, sir?

3    "A.   I believe this is output from discussion that we had with

4    U.S. Task Force on the metrics of the plan we submitted

5    February 17th."

6    BY MR. KURTZ:

7    Q.    Does that now confirm for you that it was the Treasury

8    Department that had dictated --

9               THE COURT:    Wait a minute.   How is that refreshing

10   his recollection?     That's Mr. Kolka clarifying.   That's the

11   point you were trying to get from this witness, but that has

12   nothing to do with clarifying whether the witness may or may

13   not have known it.

14              MR. KURTZ:    Okay.

15   Q.    Does that clarify for you, Mr. Manzo, what your

16   understanding is of the e-mail that you received?

17   A.    Well, it -- you just read me that Mr. Kolka agreed to the

18   e-mail, that said that he thinks that was based on the

19   discussion with Treasury, so.

20   Q.    Correct.    So do you now --

21   A.    I accept what you just read as being accurate.

22   Q.    Okay.    And do you agree that your speculations that maybe

23   Fiat or FinCo had made those demands were wrong?

24   A.    You just read me a sentence which said --

25   Q.    Yes, so do you agree?
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1    A.   -- it is from the U.S. Treasury, so I suppose the answer

2    to that is yes.    I'll accept Mr. Kolka's statement in his

3    deposition.

4    Q.   Okay.    By the way, do you really feel like you need to

5    speculate about whether that could have been Fiat or FinCo, as

6    opposed to simply reading it reasonably and agreeing with what

7    it obviously said?

8              MR. CULLEN:   Objection.   The question asked for the

9    witness's recollection and understanding, and we're really now

10   getting into depth.

11             THE COURT:    The objection is sustained.   If you want

12   to put this deposition in to clarify as to where Mr. Kolka --

13   what Mr. Kolka was referring to when he wrote this e-mail,

14   fine.   But I don't see getting in -- you know, using this as

15   evidence to show the witness he should change his mind about a

16   possible -- a speculation he's made makes any sense.

17             MR. KURTZ:    Well, I read the excerpt in, Judge, so I

18   don't think I need to go any further, in terms of introducing

19   the deposition, unless the Court wants me to do so.

20             THE COURT:    No, it's up to you to create the record

21   that you want.

22             MR. KURTZ:    Yes, I'm comfortable that I've created it

23   by reading that excerpt into the record.

24             THE COURT:    All right.

25   BY MR. KURTZ:
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1    Q.   Okay.   Let's now turn to Pensioner Exhibit number 8.

2    A.   Yes, I have it.

3    Q.   You've read that?

4    A.   I have.

5    Q.   Okay.   Now, you had just testified that you didn't

6    understand that the Treasury Department controlled the decision

7    about how to resolve this case.    The bottom e-mail is from you

8    to Treasury on April 29th, correct?

9    A.   That is correct.

10   Q.   That's one day before the bankruptcy filing, right?

11   A.   That is correct.

12   Q.   And you sent that around 10:44 p.m., right?

13   A.   Yes.

14   Q.   And you sent that to Ron Bloom and Matthew Feldman of the

15   Treasury Department, right?

16   A.   That is correct.

17   Q.   Now, you note your understanding that the nonconsenting

18   senior secured lenders wanted an additional 500 million dollars

19   shared among them, right?

20   A.   Yes, that's correct.

21   Q.   And it was your opinion that the debtors should reach a

22   resolution, right?

23   A.   Yes, in discussions with Mr. Nardelli and Mr. Kolka, it

24   was always the steadfast hope that we would be able to

25   accomplish a consensual resolution in a restructuring outside
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1    of Chapter 11.    And when I mentioned to them that there were

2    discussions ongoing, it --

3    Q.   Sir, my question is just, whether you wanted to reach a

4    resolution.     Yes or no.

5              MR. CULLEN:    If I could ask that the counselor not

6    interrupt the witness.

7              THE COURT:    Yes, don't interrupt him.     Let him

8    finish.   Finish your response to the question.

9              THE WITNESS:       Thank you, Your Honor.   It was always

10   the company's hope that we would be able to accomplish it

11   outside of Chapter 11, and this was the company's last ditch

12   effort to make sure that the parties in the deal knew that the

13   company would try to look for ways to bridge the gap between

14   the bid and the ask price with the secured creditors, in an

15   effort to avoid filing Chapter 11.

16   BY MR. KURTZ:

17   Q.   Well, when you learned what the ask was, you said, "that's

18   too close to not exhaust every avenue to get this done," right?

19   A.   That is correct.

20   Q.   Then you said to the Treasury Department, "Please let us

21   know what we can do to bridge the gap."      Right?

22   A.   Yes, that's correct.

23   Q.   Example, if we have to look at more vendor consolidations

24   to save money here, we will, right?

25   A.   That is correct.
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1    Q.   We can easily find 250 million dollars of savings to help

2    fund this last piece, right?

3    A.   That is correct.

4    Q.   And you had other ideas as well, right?

5    A.   That is correct.

6    Q.   And then you say to the Treasury Department, "I hope you

7    think it's worth giving this one more shot.     We will work with

8    you and Matt to get this done.    I'm around," right?

9    A.   That is correct.

10   Q.   Now, you got a very petulant response from the Treasury

11   Department, didn't you?

12   A.   I got a response that Mr. Feldman submitted shortly after

13   I sent the e-mail, yes.

14   Q.   And the response which came what, two minutes later --

15   A.   Yep, two minutes.

16   Q.   -- was as follows, "I am now not talking to you."     By the

17   way, did you find that sort of childish, "I am now not talking

18   to you" by the federal government?

19   A.   At this juncture of the game on the eve of Chapter 11 with

20   50,000 employees, hundreds of thousands of people's lives at

21   stake, I must tell you, childish does not enter into the

22   equation when you're giving advice.

23   Q.   Well, you were given advice to resolve the matter, and

24   that you could finance it, and the government was saying, "I'm

25   not talking to you now," does that sound like productive dialog
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1    in support of saving the company from attacks that are going to

2    impact thousands of jobs, as you say?

3             MR. CULLEN:    Objection to the form of the question.

4             THE COURT:    All right.   What's your objection to the

5    form?

6             MR. CULLEN:    I believe the question is on several

7    unfounded premises, and a contentious conclusion, so it's

8    faulty as to form.

9             MR. KURTZ:    Your Honor, this is cross-examination.

10   There is nothing wrong with that question.     The witness has

11   said he found this nothing childish because they were trying to

12   save the world, and I'm suggesting that perhaps that "I'm now

13   not talking to you," in response to that when they were

14   proffering a solution that they could finance internally

15   without costing the U.S. Treasury any money, in fact, is

16   inconsistent with that.

17            THE COURT:    Restate the question.

18            MR. KURTZ:    Okay.

19   BY MR. KURTZ:

20   Q.   He went on to say "You went where you shouldn't," right?

21   A.   That's what he says, right.

22   Q.   All right.   You were suggesting a resolution for a

23   consensual bankruptcy in connection with the reorganization of

24   the estate, and he was saying, "You went where you shouldn't,"

25   right?
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1    A.   That's what he said, yes.

2    Q.   And your response was very apologetic, wasn't it?

3    A.   That is correct.

4    Q.   You said, "Sorry, I didn't mean to say the wrong thing and

5    obviously I did," correct?

6    A.   That's what I wrote, yes.

7    Q.   "I was just trying to make sure that if we had to

8    contribute to the solution, you knew we had some room," right?

9    A.   That is correct.

10   Q.   So again, the company itself had room to have a solution

11   but U.S. Treasury said no, right?

12   A.   Said no to our offer to help bridge the gap.     I was later

13   told by Mr. Feldman that they were still having dialog directly

14   with the first-lien lenders, and they thought that our

15   involvement at that stage of the discussions, would not be

16   productive to bridge the gap between the bid and the ask, which

17   is why he wrote the e-mail the way he did.

18   Q.   In the first place, I can assure you that nobody ever

19   spoke to the nonconsenting.

20        Let's try -- you were addressing money for the

21   nonconsenting senior secured lenders, right?

22   A.   I was addressing the overall financing gap and the deal

23   between the first-lien lenders.   We weren't involved in the

24   discussions, you know, specifically what different subgroups in

25   the first-lien lender group were asking for or not.    I was
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1    merely saying to the people negotiating, we have room to help

2    bridge the gap, please let us know if we can be helpful.

3    Q.   Wait a minute.    You were talking about financing a

4    solution for the first-lien lenders that weren't consenting to

5    the transaction, right?

6    A.   That's correct.

7    Q.   Okay.    Not the first-lien lender group represented by

8    Simpson Thacher, right?

9    A.   The first -- I don't make a distinction.    We, on the

10   company side, always look at the first-lien lender group as one

11   group of lenders with rights.

12   Q.   Okay.    You don't make a -- let me then direct you back to

13   your e-mail where you said, "If I understand it correctly, they

14   want the 2 billion shared pro rata and an additional 500

15   million shared only among their hold-out group."    Do you see

16   that?

17   A.   I do.

18   Q.   Is it fair to say you were distinguishing between the

19   group at large and those that weren't consenting to the

20   transaction, which you were characterizing as a hold-out group?

21   A.   I was just trying to understand where the difference is,

22   in terms of the bid and ask were by asking that question.

23   Q.   Right.    You came to the understanding that the non-

24   consenting group wanted 500 million dollars more, correct?

25   A.   That's what I was told, correct.
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1    Q.   To be shared only among themselves, right?

2    A.   That's what I was told, correct.

3    Q.   And you said that we could bridge that gap by taking steps

4    internally, including vender consolidations, right?

5    A.   A number of steps that you had reiterated before, that's

6    correct.

7    Q.   Okay.   And by the way, so you finish your e-mail to the

8    government by saying, sorry again, right?     "Sorry I didn't

9    realize the mistake!!" exclamation point, exclamation point.

10   Right?

11   A.   That is accurately right, correct.

12   Q.   And then Treasury told you, no, you will not be able to

13   resolve the dispute with the nonconsenting senior secured

14   lenders, right?

15   A.   It doesn't say that.   He says a bunch of other things, but

16   you're paraphrasing.

17   Q.   Well, let's see what he says.   Maybe that's not fair.      He

18   says it's, "over," right?   That's what he said, "It's over,"

19   right?

20   A.   He says, starts a sentence, "It's over," correct.

21   Q.   Then he says, "The President doesn't negotiate second

22   rounds," right?

23   A.   That's correct.

24   Q.   Then he said, "We've given and lent billions of dollars so

25   your team could manage this properly," right?
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1    A.   That is correct.

2    Q.   Then he says, "I protected your management and board and

3    now you're telling me you're going to put me in a position to

4    have to bend to a terrorist like Lauria, that's BS."     Do you

5    see that?

6    A.   I do.

7    Q.   But you don't read that as saying no, the company can't

8    settle with these guys, do you?

9    A.   I read that to mean don't get involved in the middle of

10   this negotiation at this late hour, there's a lot of moving

11   parts to it, and all you could do by getting involved is

12   perhaps make the gap wider, that's how I interpreted this

13   e-mail and that's why I called Mr. Feldman after I sent it.

14   Q.   Make the gap wider.      You just said you could finance this,

15   and he said, "It's over, the President doesn't negotiate second

16   rounds."     Isn't that true?

17   A.   That's what he says in his e-mail to me.

18   Q.   In his e-mail, which is here before us, right, that we can

19   actually look at and not talk about conversations nobody was

20   privy to, right?

21               MR. CULLEN:   Objection, Your Honor, page two we were

22   privy to.

23               MR. KURTZ:    No one in this courtroom.

24   Q.   Mr. Manzo, is that --

25               THE COURT:    What's the question?
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                             CHRYSLER LLC, et al.

1               MR. KURTZ:   The question --

2    Q.     Let me ask you this.   The Treasury Department said, "I've

3    protected your management and board, and now you're telling

4    me."    How did the Treasury Department protect your management

5    and your board?

6    A.     I don't know what that reference is.    You'd have to ask

7    Mr. Feldman that.

8    Q.     Well, you just said you spoke to him.    Did you say, my

9    God, what have you done to protect my management and my board?

10   That almost sounds conspiratorial.     What do you mean?

11   A.     No, actually at this hour, the day before filing, I was

12   more concerned about bridging the gap and saving the company

13   from liquidating, to be honest with you.

14   Q.     And I think that's valid, but the Treasury Department said

15   you couldn't do it, right?

16   A.     They said don't involve yourself in the negotiation,

17   that's correct.

18   Q.     Where does it say don't involve yourself in the

19   negotiation.    I haven't seen that language.    Could you point

20   that to me?

21   A.     In my discussions --

22   Q.     No, no, in the e --

23   A.     -- as I indicated.

24   Q.     No, I want to talk about the e-mail.    Where does it say

25   that?
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1    A.   It doesn't say don't involve yourself in the negotiations.

2    That was my reference to my discussion with Mr. Feldman --

3    Q.   I --

4    A.   -- after I sent the e-mail to him.

5                MR. KURTZ:    Your Honor, I move to strike, that's

6    hearsay.

7                MR. CULLEN:    Please --

8                THE COURT:    Just a minute.   You asked for the

9    response, you got the response --

10               MR. KURTZ:    Judge, I'm asking --

11               THE COURT:    -- and now you're saying it's hearsay.

12   It's what his recollection is, and that's the impression he

13   walked away with.

14               MR. KURTZ:    Judge, my question --

15               THE COURT:    And that's all it is.

16               MR. KURTZ:    My question is what the e-mail says.     I

17   did not ask this witness to go off on --

18               THE COURT:    The second time you clarified it, and

19   said what the e-mail said.

20               MR. KURTZ:    Okay.

21               THE COURT:    The first time it was a broader question,

22   in which the witness interpreted as where he received that view

23   or that understanding.      And then when you asked it the second

24   time, you asked him to limit it to the e-mail.

25               MR. KURTZ:    Okay.   Well, that was where we left, and
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                               CHRYSLER LLC, et al.

1    so let me go back to where we left.

2    BY MR. KURTZ:

3    Q.   Mr. Manzo, the written instruction you got from Matthew

4    Feldman of the Treasury Department was in response to your

5    request to help resolve the dispute and your statement that you

6    had room to contribute was, "it's over", right?

7    A.   That's correct.

8    Q.   By the way, did it trouble you at all that a senior member

9    of the Treasury Department would characterize an attorney

10   representing the interests of secured creditors as a terrorist?

11   A.   Again, you need to understand the context of when this

12   occurred.    This --

13   Q.   No, I'm just asking whether it troubled you.

14   A.   I'm trying to explain to you.

15   Q.   Can you tell me yes or no, whether it troubled you?

16   A.   No, it didn't trouble me.

17   Q.   Okay.    Let me --

18               THE COURT:    How much longer is the cross?

19               MR. KURTZ:    I don't really have that much more, Your

20   Honor, probably another ten minutes.

21               THE COURT:    Okay.

22               MR. KURTZ:    Maybe less.

23   Q.   Let me ask you now, Mr. Marzo (sic), to turn to Exhibit 9.

24               MR. CULLEN:    Mr. Manzo.

25               MR. KURTZ:    Mr. Manzo, I'm looking down at my
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                             CHRYSLER LLC, et al.

1    deposition exhibit tab, and it looks like it says Marzo.

2               THE COURT:   Okay.

3               MR. KURTZ:   I'm sure, that's the least of how I'm

4    offending you.

5    Q.   Do you have it in front of you?

6    A.   I do.

7    Q.   This is an e-mail from March 29th, right, from Mr. Kolka

8    to you?

9    A.   That's correct.

10   Q.   Mr. Kolka is the CFO of Chrysler, right?

11   A.   Yes, he is.

12   Q.   And he says to you, "How do you think banks will react to

13   statement that substantially all of their debt is gone?"    Do

14   you see that?

15   A.   I do.

16   Q.   And you respond, "Oh, baby," right?

17   A.   That's what I responded, yes.

18   Q.   You almost sound gleeful there, don't you?

19   A.   No.

20   Q.   Well, you sound at least excited, don't you, "Oh, baby"?

21   A.   Yeah, it's excitement, yes.

22   Q.   All right.    Apparently, the loss of the bank's security

23   interest is exciting stuff for you, right?

24   A.   I'm sorry?

25   Q.   The loss of all the bank's debt is exciting stuff for you,
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1    right?

2    A.   No.

3    Q.   Okay.   What do you think -- and what do you have, like,

4    seven or eight question marks there?

5    A.   Would you like me to count them?

6    Q.   You can just estimate or you can count, it's up to you.

7    A.   Six or seven.

8    Q.   Okay.   "At least this time, we can't be criticized and

9    threatened that if we don't change the words they will kill

10   us," with like what, four or five exclamation points?

11   A.   That's about right.

12   Q.   Very emphatic in this e-mail?

13   A.   Four or five exclamation points, right.

14   Q.   And then they say, I find this remarkable, this is you,

15   "They deserve what they get."   That was your statement, right?

16   A.   That's correct.

17   Q.   Okay.   So the senior secured lenders to Chrysler deserved

18   to have all their debt gone, that's what you said in your

19   e-mail, right?

20   A.   No, that's not what I said in my e-mail.

21   Q.   Well, what you had reported -- the question was, what do

22   you think the reaction will be when all the debt is gone, and

23   your response is, "they deserve what they get," right?

24   A.   That was my ending response, that's correct.

25   Q.   All right.   In other words, the senior secured lenders
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1    deserve to lose their money, right?

2    A.   No, they don't deserve to lose their money, not at all.

3    Q.   Well, you said in your e-mail that, you know, I guess from

4    my standpoint, the teachers and the firefighters and others who

5    have pension funds invested in Chrysler, secured debt deserve

6    to lose their money, that's what you said, right, they deserve

7    what they get, --

8    A.   No.

9    Q.   -- the loss of their debt, right?

10   A.   I wrote the e-mail, that's not what I meant.

11   Q.   Ah, it's what you said though, right?

12   A.   No, it's not what I said at all.

13   Q.   Well, you can allow for the possibility that you're a

14   little more candid in your private e-mails and perhaps you're

15   being here in front of the public today?     Right?   Don't you

16   feel a little more comfortable --

17   A.   No, that's not accurate at all, no.

18   Q.   You don't feel a little more comfortable speaking your

19   mind when you're having a private e-mail exchange, than when

20   you're sitting on the stand with cameras on you, and hundreds

21   of people watching you?

22   A.   I answered truthfully both ways, not a problem at all.

23   Q.   And the truthful answer, as you said, in response to the

24   question about the banks losing all their debt, is they deserve

25   what they get.   That's what you said, right, truthfully, right?
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1    A.   Yeah, "the deserve what they get" is a reference to the

2    banks chose to not negotiate any other restructuring activities

3    with Chrysler, rather they chose to negotiate with the U.S.

4    Treasury.   The company attempted on numerous occasions to

5    engage the banks.   We provided term sheets, we set forth debt

6    restructuring positions, we provided the banks with a

7    combination of debt and equity, as part of out-of-court

8    restructurings, and we were steadfastly told by the senior

9    secured lender group that they would not respond to the

10   proposals, that they believed the debt was worth par, and that

11   if they were to negotiate with anyone, they would do so only

12   with the U.S. Treasury.

13        This statement is in reference to for months the company

14   trying to have a negotiation, being rebuked each and every

15   time, and therefore now being told by the Treasury that there

16   would be a substantial reduction of your debt.   My statement

17   was in that regard.

18   Q.   So your statement is that you tried to negotiate with

19   them, and they actually had the gall to continue to believe

20   that their secured loans ought to be treated like secured

21   loans, right?

22   A.   No, not as secured loans.   We never asked them to not

23   treat their loans as secured loans.

24   Q.   Were you --

25   A.   We asked them to recognize the fact that their position,
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1    in our view, was undersecured, and therefore, in all

2    restructurings, undersecured creditors are often asked to take

3    reductions of their indebtedness in exchange for other

4    securities, like as we proposed in our restructuring proposal

5    equity.

6    Q.   Yeah, and what you said is, can you write your seven

7    billion dollar secured loan to two billion dollars, right?

8    A.   That's what we had proposed.   In addition --

9    Q.   That's okay.

10   A.   And n addition, we had proposed that in lieu of and for

11   compensation of their reduction of indebtedness, we proposed to

12   give them equity to compensate them for the difference.

13   Q.   Equity worth five billion dollars?

14   A.   We didn't value the equity of the restructured company,

15   but we provided them with equity to make up for the reduction

16   of indebtedness.

17   Q.   Okay.   But not to make up for the seven billion dollar

18   secured loan, right?    Are you saying that there was no need to

19   compromise, that they were going to be made whole under your

20   proposals?

21   A.   We didn't -- again, let me state, we did not value the

22   restructured company.    We merely said that under this

23   methodology we would propose that several billions of dollars

24   of bank debt be restructured as debt, and that we provided the

25   banks with an equity, a significant equity stake, in fact, the
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1    largest equity stake.    Over fifty percent of the equity to the

2    banks was provided in our restructuring proposal.    The banks

3    would have controlled the majority of the stock of Chrysler.

4    Q.   By the way, people who buy secured debt may want to be in

5    a position of secured debt, as opposed to equity, right?

6    A.   Most of the time when they buy it I presume they want to

7    be repaid on their secured debt, but in restructuring circles,

8    secured lenders routinely swap their secured debt claim for

9    something other than debt, either junior debt or equity,

10   routinely happens in every major restructure.

11   Q.   Are you seriously quarreling that the senior secured debt

12   holders were not going to be, you know --

13            MR. KURTZ:     Strike that.

14   Q.   Do you agree that you never made a proposal to senior

15   secured lenders that would have made them -- that would have

16   given them seven billion dollars of secured debt, right?

17   A.   That's correct, we did not provide --

18   Q.   And would that two billion --

19   A.   -- that proposal.

20   Q.   Just a step at a time, please.    It would have been two

21   billion dollars in cash, is that right?

22   A.   We provided them with a two billion dollar note.

23   Q.   No, not even cash, a two billion dollar note, right?

24   A.   A two billion dollar secured note, that's correct.

25   Q.   Okay.   And then five billion would somehow be -- you know,
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1    would be released and somehow you would get some equity in some

2    company, and you can't tell me what the value of that equity

3    was, right?

4    A.   The proposal was, I believe, over fifty percent of equity

5    in the out-of-court restructure of Chrysler.

6    Q.   And you can't tell me what that fifty percent equity was

7    worth, right?

8    A.   That's correct, we did not value, for purposes of that

9    proposal to the bank group, the fifty percent piece of the

10   equity we were providing them.

11   Q.   All right.    And you are a senior financial advisor to

12   Chrysler, right?

13   A.   That is correct.

14   Q.   With fiduciary responsibilities to the estate, correct?

15   A.   That is correct.

16   Q.   Including the bank lenders, correct?

17   A.   Correct.

18   Q.   And your view was if they didn't take the deal that you

19   offered, oh, baby, they deserve what they get, right?

20   A.   No, that's not correct.

21   Q.   Well, that's what you wrote, right?    You wrote, "Oh, baby,

22   they deserve what they get," right?

23   A.   At the end of the culmination of the process where we

24   tried to engage them and they refused to negotiate one time

25   with the debtor or the company, when we were out of court, this
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1    was a reaction to their desire not to want to negotiate with

2    the company, but rather they chose to negotiate with the U.S.

3    Treasury.    It was a reaction to that.

4    Q.   Well then, let's just make clear.    You think that your

5    e-mail that's been marked Pensioner Exhibit number 9 is totally

6    appropriate, right?

7    A.   At the time when I wrote it, I was expressing my feelings

8    to Mr. Kolka.

9    Q.   And you think it's appropriate, right?

10   A.   I don't know if it was appropriate or inappropriate.        It

11   was how I felt at the time to Mr. Kolka.

12   Q.   Okay.   And do you allow for the fact that as a fiduciary

13   to the banks, it might not have been appropriate, whether it

14   was at that time or any other time, for you to say "Oh, baby,

15   they deserve what they get," when they lose substantially all

16   their debt, is that an appropriate position for a fiduciary of

17   the estate to take with respect to senior secured lenders?

18   A.   I have no problem with that, because --

19   Q.   Okay.

20   A.   -- steadfastly all along, including beyond this date, we

21   attempted to engage the bank group in new negotiations.     We

22   proposed new capital structures.   We even proposed a new

23   transaction with General Motors in the end of March and April

24   to maximize the value for the estate, for all its creditors,

25   primarily, the senior secured creditors.
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1         So nowhere along the line, did this company or Capstone

2    give up on its view of maximizing the value of the returns for

3    all constituents.

4    Q.   By the way, none of that is in here.      You don't talk about

5    anything relating to some alleged concern about prior

6    negotiations, do you?

7    A.   Not in this e-mail, no.

8    Q.   No, not in the e-mail.     And fundamentally, no matter how

9    you slice it, your view is if they didn't take your deal, then

10   they deserved to lose all their money, right?

11   A.   No, that's not my view at all.     That's why we were --

12   Q.   By the way, let me --

13   A.   -- pleased to involve ourselves in the negotiation to

14   provide the senior secured creditors with more value than was

15   being allocated to it by Treasury, in an effort to give them

16   more value to reach a consensual deal.

17            THE COURT:     I think you've made your point.

18            MR. KURTZ:     Okay.   I just have one more question,

19   Judge.

20   Q.   Is your testimony about what you said in your e-mail as

21   truthful and as accurate as is your testimony about the

22   liquidation value of Chrysler?

23   A.   The statement that I made here is my statement, and I

24   stand by it, and a liquidation analysis, as prepared by

25   Capstone and by me, I stand by it in terms of its accuracy.
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1    Q.   Okay.   By the way, you're aware that there are individuals

2    across the country that have pension assets that are in the

3    first lien credit facility that aren't being paid ten million

4    dollars for a successful sale here, that can't really afford to

5    lose all their money, because they deserve it or otherwise?

6             MR. CULLEN:    Objection, Your Honor.

7             THE COURT:    What's the purpose of that question?    I

8    mean, really.

9             MR. KURTZ:    Okay.

10   Q.   Can you turn to exhibit --

11            MR. KURTZ:    This is my last exhibit, Judge.   Do you

12   want a break, or do you want me to complete it?

13            THE COURT:    No, you can complete it.

14   Q.   Can you turn to Exhibit 10, please?

15   A.   Sure.

16   Q.   That's an e-mail from Mr. Kolka to you dated April 2,

17   2009, correct?

18   A.   Uh-huh, that's correct.

19   Q.   And he's reporting about a conversation that he had with

20   Treasury, right?

21   A.   I have to read it, one second.

22   Q.   Please do.

23        (Pause)

24   A.   Yes, I read it.

25   Q.   Okay.   This is reporting about a conversation with Bloom
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1    and Feldman from the Treasury Department, right?

2               MR. KURTZ:   Well, strike that.

3    A.     He doesn't say that.

4    Q.     Let me read the third sentence here.     Bloom and Feldman --

5    those are the Treasury Department senior representatives,

6    correct?

7    A.     Yes, they are two people in the Automotive Task Force.

8    Q.     "Bloom and Feldman found another reason to do 363, even if

9    banks agree, so it was a likely path", do you see that?

10   A.     I do see that.

11   Q.     Is that true that by April 2, 2009, Treasury had found

12   another reason to do a 363 sale, even if the banks had all

13   consented, and so that was going to be the path that would

14   likely be followed?

15   A.     No, not that I'm aware of.

16   Q.     Okay.   Well, did you quarrel with this, when Mr. Kolka

17   sent it to you, and reported that Bloom and Feldman had so told

18   him?

19   A.     I read it, but I quarrel with it, it's a statement that

20   Ron made based on some facts or some discussion he had with

21   Bloom or Feldman.

22   Q.     All right.   Do you think Ron Kolka's an honest guy?

23   A.     Yes, I do.

24   Q.     Do you think that he'd accurately report events?

25   A.     I do believe he would.
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1    Q.   He says, "Need to leave as much cash" -- I'm sorry.    "Need

2    to leave as much behind as possible and little cash."    Do you

3    see that?

4    A.   I do.

5    Q.   And that's to leave behind in all Chrysler as much of the

6    liabilities as possible, and as little of the cash as possible,

7    right?

8    A.   You inserted the word liabilities.   It doesn't say

9    liabilities.

10   Q.   And you didn't understand it to mean liabilities?

11   A.   No, not at all.

12   Q.   So you thought it said, "Need to leave as much" what, cash

13   behind as possible, and little cash, I mean, what did you think

14   was getting left behind?

15   A.   The remaining assets being left in OldCo.

16   Q.   What assets as of April 2nd, which were a value to New

17   Chrysler did you contemplate being left behind in OldCo?

18   A.   There are certain assets being left behind as part of the

19   contemplated transaction with Fiat.

20   Q.   Only those that New Chrysler doesn't want, right?

21   A.   No, not necessarily.

22   Q.   Well, tell me what asset the new Chrysler wants as being

23   left behind for OldCo, so we can figure out how much it's

24   worth?

25   A.   There are prepaid assets, insurance, there are prepaid
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1    deposits.    There are certain security investments in various

2    hedges that Chrysler has, all fairly liquid assets that I'm

3    sure NewCo would love to have, but that are being left behind

4    in OldCo.

5    Q.   Sir, did you understand Treasury was interested in leaving

6    behind additional value for the Old Chrysler?

7    A.   I do.

8    Q.   Okay.    So then let's look at the next sentence in light of

9    that.    "Bloom and Feldman said we only had to leave enough

10   behind to pay severance, not fund the liquidation.    That was

11   the bank's problem."    That was the report from Mr. Kolka,

12   right?

13   A.   That is the report, right.

14   Q.   So contrary to what you just said, you only want to leave

15   behind enough to pay severance, right?

16   A.   I read this last sentence to mean cash, not other assets.

17   Q.   Okay.    But it doesn't have the word cash, does it?

18   A.   No.    But you asked me how I read the sentence, and that's

19   how I read it.

20   Q.   Okay.    But the last sentence you said doesn't have the

21   word liability, you won't insert it, now you're inserting a

22   word, right?

23   A.   No, because here it says behind to pay.    To pay, you

24   actually have to have cash to pay, --

25   Q.   Or liquid?
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1    A.   -- you can't pay with in kind assets.

2    Q.   Or you can pay with liquid securities, right?

3    A.   You have to have cash.    You have to convert them.

4    Q.   Okay.   But you -- people can pay with cash or with liquid

5    securities, right?

6    A.   No.   You pay severance with cash.

7    Q.   You can't liquidate a security?

8    A.   Oh, that's different.    Certainly you can.

9    Q.   That's why it's called a liquid security, right, because

10   you can turn it into cash quickly?

11   A.   Eventually, sure.

12   Q.   Eventually or quickly?

13   A.   What kind of security would you like to give me in your

14   hypothetical?

15   Q.   A liquid security.

16   A.   A liquid security?    Is it a thinly traded security?

17   Q.   No, it's one that's liquid.

18   A.   Yeah, if it's liquid with a current market value, you can

19   certainly attempt to liquidate those in the market fairly

20   quickly, so your statement would be correct.

21   Q.   Okay.   And the severance, that's an obligation for the

22   unions, right?

23   A.   That's a union and nonunion obligation.

24   Q.   Okay.   That's an employee obligation, right?

25   A.   That's correct.
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1    Q.   And you understood that Treasury favors those creditors,

2    right?

3    A.   Which creditors?

4    Q.   Employees, voters, right?

5    A.   Treasury was certainly concerned about the employees of

6    Chrysler, that's correct.

7    Q.   And was going out of its way to ensure that enough was

8    left behind to pay the severance, right?

9    A.   I don't know what going out of its way means, but they

10   were concerned that there needed to be money in OldCo to pay

11   severance of employees, that's correct.

12   Q.   Let's say go out of the way means that both Bloom and

13   Feldman, senior people with lots of things to do, took the time

14   to call Mr. Kolka and tell him to do so?   Right?   Using that

15   definition, Bloom and Feldman went out of their way to say that

16   Chrysler had to leave enough behind to pay severance, right?

17   A.   To the extent writing an e-mail is going out of their way,

18   I guess that's accurate.

19   Q.   Well, do you -- I don't see an e-mail.    Who says that that

20   was done by e-mail?

21   A.   This is an e-mail Mr. Kolka sent to me.

22   Q.   Yeah, reporting about a conversation he had with Bloom and

23   Feldman, right?

24   A.   Oh, I suspect you're right, yes.

25   Q.   Okay.   And then the last comment, of course, is that not
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1    fund the liquidation, that's the bank's problems.       In other

2    words, don't leave enough cash even to fund the liquidation,

3    right?

4    A.   That's correct.

5    Q.   Because unlike the employees, it's the bank's problem,

6    right?   Yes?

7    A.   It says that was the bank's problem in this --

8    Q.   Okay.

9    A.   -- e-mail, correct.

10               MR. KURTZ:    All right.   Your Honor, two matters.

11   One, I'd like to move into evidence each of the exhibits, 1

12   through 10, that I just went through with this witness.

13               THE COURT:    Any objection to 1 through 10?

14               MR. CULLEN:   Yes, Your Honor, I'm going to object to

15   number 7, which was not -- I was going to object to number 7

16   which was not identified or validated, or ever seen before by

17   the witness.    He doesn't provide sufficient foundation for the

18   exhibit.

19               I'm going to object likewise to number 8, which he

20   didn't testify to the prominence or meaning of at all.

21               I'm going to object to -- no, not number 8, I'm

22   sorry, Your Honor, let me make sure that I've got this

23   straight.    I'm going to object to number 4, which he did not

24   say that he saw, contributed to, or knew anything about the

25   calculation of.
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1             And I'm trying to find the document you called

2    Chrysler break-up analysis.

3             MR. KURTZ:     It's Exhibit number 5.

4             MR. CULLEN:     Exhibit number 5.   I'm also going to

5    object to number 5, because there was nothing -- no foundation

6    laid with this witness that he knew anything about, saw before,

7    could validate, or otherwise authenticate that document.

8             MR. KURTZ:     Your Honor, let me start with 5.    That

9    was authenticated through Mr. LaSorda.

10            MR. CULLEN:     No, it wasn't.

11            MR. KURTZ:     It was, but if -- and it has been

12   produced by Chrysler, and if we're going to have authentication

13   issues with respect to this, then I ask that the Court grant a

14   continuance, or otherwise have Chrysler produce a custodian of

15   documents now, so that I can go through my authentication

16   exercise with anyone Chrysler thinks is appropriate.

17            Two, with --

18            THE COURT:     Well, let's deal with 5; 5 was produced

19   by Chrysler?

20            MR. CULLEN:     Yes, Your Honor.

21            THE COURT:     And so you --

22            MR. CULLEN:     We don't have any testimony as to who

23   the document was done by.     Mr. LaSorda, as I recall, was able

24   to identify the people.    He was not able to say anything about

25   or validate the analysis or respond to the analysis.       He saw
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1    it, is all he said.

2             MR. KURTZ:   Your Honor, it was sent -- it was a

3    break-up valuation that he said was produced by Chrysler along

4    with Cerberus.   It was produced out of Chrysler's files.    It is

5    a business record and it is admissible.

6             If there is an authentication issue, and I don't

7    believe there is, in light of the testimony, then like I said,

8    I would like to have a document custodian on the stand, so that

9    I can go through this exercise in front of this group.

10            THE COURT:   All right.    Five is admitted.

11   (Pensioner's Exhibit 5, Chrysler's breakup analysis, was hereby

12   received in evidence as of this date.)

13            THE COURT:   Your objection to 4?    4 was heard, what's

14   your response to the objection to 4?

15            MR. KURTZ:   Your Honor, this is a Greenhill

16   fairness -- draft fairness opinion.    The debtors have moved for

17   the introduction of Greenhill's final fairness opinion, a draft

18   would, of course, be admissible.

19            This sort of begs the question, which is they haven't

20   brought in Greenhill, so I don't think anything from Greenhill

21   would otherwise be admissible.     I think that the draft was

22   admissible with this witness just to explore whether or not

23   he's had the benefit of reviewing any of the valuations that

24   have been performed by others.     But if the debtors withdraw

25   their request for the introduction of any evidence and fairness
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1    opinions and otherwise from Greenhill, then maybe my

2    evidentiary basis would go away as well.

3             Certainly, the debtors don't get it both ways,

4    although I preserve my objection that Greenhill doesn't get to

5    testify at all, because they didn't produce the witness to be

6    cross-examined today.

7             MR. CULLEN:    Your Honor, first with respect to the

8    document itself.   As I recall the testimony on this document,

9    it was questions about numbers that Mr. Manzo could not see, on

10   a document that he could not say he had read.

11            Nonetheless, in the interest of time and reciprocity,

12   if this document was authenticated in the Greenhill deposition

13   in any way, I'll let it come in as authenticated in that

14   deposition, if the -- if Counsel will let the final fairness

15   opinion come in as authenticated in that deposition, and we'll

16   leave that where it sits.

17            MR. KURTZ:     We don't agree to the introduction of

18   testimony from an expert that was not produced here in court

19   today, Your Honor.    If we're overruled, then obviously this

20   would be admissible as well.    But I suppose neither is

21   admissible without a Greenhill representative.

22            THE COURT:     Well, this is the first I'm hearing of

23   the Greenhill issue, so why don't we put this one aside until

24   we can hear a little bit more about this Greenhill issue and

25   the admissibility of any report from them.     So I'll reserve on
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1    this one.

2                MR. KURTZ:    Exhibit 7, Your Honor, is that next?

3                THE COURT:    Now, I wasn't clear about what counsel

4    was saying.    You're still objecting to 7?

5                MR. CULLEN:    Yes, yes.   Yes, Your Honor, Exhibit 7.

6    We don't have any testimony from this witness either that he

7    saw the document or that he talked to his colleague, Aronson,

8    about the document, that he saw it before in any way.

9                THE COURT:    All right.   Who produced this document?

10               MR. KURTZ:    Capstone, Your Honor.

11               THE COURT:    All right.

12               MR. KURTZ:    That's the KAPR Bates number, --

13               THE COURT:    Uh-huh.

14               MR. KURTZ:    -- so this is a witness from Capstone.

15   If he can't authenticate, then we ask that Capstone produce a

16   witness that can, who presumably can try to explain that they

17   produced documents that they don't keep in the ordinary course

18   of their business.

19               THE COURT:    All right.   Counsel?

20               MR. CULLEN:    Well, just for the sake of the rules of

21   the game, the fact that something is a document in a file

22   drawer does not mean it's in the ordinary course of business,

23   which has a number of restrictions and limitations.       I don't

24   think the document is any big deal, but I don't think it's been

25   properly authenticated either.
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1             THE COURT:    All right.   Then the choice we have is to

2    afford time to bring Mr. Quackenbush in to authenticate it.

3    And is it worth that effort?

4             MR. CULLEN:    No, it's not.

5             THE COURT:    All right.   So that's admitted.

6    (Pensioner's Exhibit 7, Capstone document, was hereby received

7    in evidence as of this date.)

8             MR. KURTZ:    Did I miss are we through with the

9    exhibits as to which you've interposed an objection?

10            MR. CULLEN:    I think we're through the exhibits to

11   which I've interposed an objection.

12            MR. KURTZ:    Your Honor, --

13            THE COURT:    All right.   The Court has reserved on 4.

14   5 and 7 are in.    What were the others?

15            MR. KURTZ:    Your Honor, one last issue that I need to

16   raise and preserve.    Now is as good a time as any.   I don't

17   think that it is appropriate or proper or admissible for a

18   witness to testify in this case, especially on such a central

19   issue, where he has a financial interest in the outcome.    I

20   think it violates a number of rules --

21            THE COURT:    Would you then tell me how any financial

22   advisor ever testifies that part of their retention includes a

23   transaction fee?

24            MR. KURTZ:    Your Honor, I find it amazing that that

25   is a term that gets used in --
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1             THE COURT:    Well, then you will be continue to be

2    astonished then.   Because as a practical matter, the Court

3    approved that retention.   You can raise any issues you want, in

4    terms of credibility, the fact that the weight I should give

5    his testimony, etcetera, but I approved his retention in this

6    matter, including the transaction fee as set forth, and it is

7    routine in cases in bankruptcy court, that the financial

8    advisor prepare a report and often testify at confirmation

9    hearings, sale hearings, etcetera.   So it may be unusual in

10   your practice, and I don't doubt that, but it is not unusual in

11   the context of bankruptcy cases.

12            MR. KURTZ:    I recognize that it's not an unusual

13   practice in bankruptcy cases, Judge, but I don't think there's

14   an exception to either the Rules of Ethics or the propriety of

15   having a witness with a contingent interest in the outcome of a

16   case, and so, you know, I raise and reserve the issue.

17            THE COURT:    All right.

18            MR. CULLEN:    I would just say, and it's my duty to my

19   witness to say that a contingent interest in a transaction

20   affected by a case is not, not, not, not contingent testimony.

21   And both the nature of the objection and the way that Mr. Manzo

22   was treated with respect to this, I think borders on the

23   sanctionable.

24            So I don't think that it should lay on the record

25   that we in any way agree that the two things are comparable, or
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1    that Mr. Kurtz's aspersions are appropriate.

2             MR. KURTZ:     Your Honor, the idea of a sanction is

3    amazing, because it's -- one of the reasons you can't go

4    forward on this basis, is within the Code of Ethics for

5    attorneys, not witnesses.    You're not allowed to proffer

6    witnesses under these circumstances.      I'm happy to brief it, if

7    counsel really feels strongly about this, as to who's --

8             THE COURT:     Why don't we just --

9             MR. KURTZ:     -- engaged in conduct --

10            THE COURT:     Just a minute, Mr. Kurtz.    Direct your

11   comments to me.     Thank you.

12            All right.     I think we've exhausted this.    You've

13   preserved whatever record you want in this regard.       I do think

14   it's permissible for the witness to testify under the

15   circumstances of his firm's retention.

16            MR. KURTZ:     Understood, Judge.

17            THE COURT:     All right.   Thank you.    Now, we had

18   others that sought cross-examination?

19            UNIDENTIFIED SPEAKER:       We have nothing, Your Honor.



22   Q.   Mr. Manzo, I'm Richard Barkasy, and I represent the ad hoc

23   committee of Consumer Victims of Chrysler.     Mr. Manzo, you

24   testified that the new company is assuming a bunch of

25   liabilities; is that correct?
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1    A.   That is correct.

2    Q.   And among those responsibilities being assumed are

3    warranty responsibilities; is that correct?

4    A.   That is correct.

5    Q.   Not among the responsibilities being assumed are pre-

6    closing tort claims; is that correct?

7    A.   I believe that is correct.

8    Q.   All right.   Are you aware of any negotiations or

9    discussions before the bankruptcy between Chrysler and any tort

10   claimants or groups representing tort claimants?

11   A.   No, I was not involved in any discussions if they took

12   place.

13   Q.   Are you aware of any of those?   And are you aware if there

14   were any?

15   A.   No, I'm not aware if there were any, no.

16   Q.   And do you know whether -- are you aware of any

17   discussions between the Auto Task Force of the U.S. Treasury in

18   any tort claimants or groups representing tort claimants?

19   A.   Again, I'm not aware that were or were not any

20   discussions.

21   Q.   And the same question with regard to Fiat.    Are you aware

22   of any discussions or negotiations between Fiat and any tort

23   claimants or groups representing tort claimants before the

24   bankruptcy?

25   A.   Again, I'm not aware if there were or there were not.
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1    Q.   Are you aware of any discussions between Chrysler and tort

2    claimants or groups representing tort claimants since the

3    bankruptcy's been filed?

4    A.   No, I am not.

5    Q.   And would your answer be the same with regard to the Auto

6    Task Force, the U.S. Treasury and Fiat?

7    A.   Yes, to my knowledge, I'm not aware of any.

8    Q.   And you testified that you've been working on the

9    transaction that brings us here for about six months, is that

10   correct?

11   A.   I've been involved in Chrysler for six months, but not

12   that long for Fiat, as they entered into the equation later on

13   in my retention.

14   Q.   You've been involved in the Fiat transactions from its

15   inception till today; is that correct?

16   A.   That is correct.

17   Q.   Are to what extent was the assumption of tort liabilities

18   a part of discussions involving Chrysler, Fiat, and/or the Auto

19   Task Force?

20   A.   Well, when we were not contemplating a bankruptcy it was

21   presumed that all the liabilities on Chrysler's balance sheet

22   would become part of the alliance.   As part of the bankruptcy

23   there were discussions about what assets and which liabilities

24   the -- Fiat would propose to take into NewCo, and the tort

25   liabilities were ones that were deemed to be, as part of the
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1    agreement, left behind in what we call OldCo, the remaining

2    Chrysler entity.

3    Q.   Who deemed that they would be left behind?

4    A.   I don't recall the specific person, but there was a number

5    of discussions internally at Chrysler and with various Fiat

6    representatives where analyses were done of liabilities that

7    would become assumed by NewCo and those that would be left

8    behind.   And over a period of, you know, many weeks and months

9    ultimately it was determined -- and I can't recall a specific

10   person, but it was determined in the transaction that tort

11   claim liabilities, as you refer to them, would stay behind in

12   Old Chrysler.

13   Q.   Before a bankruptcy came into the picture had Fiat agreed

14   to assume the tort liabilities?

15   A.   Yeah, that's my recollection before there was

16   contemplation of a Chapter 11.

17   Q.   I want to read into the record and then just ask you a

18   question about a few sentences of testimony from Mr. Kolka's

19   deposition on May 24, 2009.    It appears at page 174 and

20   beginning at line 15 and continues to page 175, line 2.

21             THE COURT:   Do you have a copy for the witness?

22             MR. BARKASY:    I don't have a copy for the witness.   I

23   only have the transcript.    May I approach the witness, Your

24   Honor?

25             THE COURT:   Go ahead.
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1                THE WITNESS:    Would you mind telling me what page

2    again?

3    Q.   Yes, I'm sorry.       Page 174 at the -- toward the very end.

4    174 beginning at, actually beginning at line 9 and ending at

5    175, line 2, 174, 9.

6    A    Okay.     Yes, I see it.

7    Q    Thank you.

8         "Q.     Just a few questions on another topic which is the

9    company's tort liability.       Are you able to tell me the claim's

10   amount" --

11   A    I'm sorry.

12   Q    Yes.     Page --

13   A    I was looking at line 9, I didn't see what you just read

14   though.

15   Q    Okay.     I'm at page 174, line 9.    The second page -- third

16   page from the end.       I have --

17               MR. BARKASY:     May I approach?

18               THE COURT:     Go ahead.

19               MR. BARKASY:     Is that the same transcript?    It looks

20   like a different one perhaps.

21               THE COURT:     All right, why don't we take -- we'll

22   take a five-minute recess and you can straighten out the

23   transcript issue.

24               MR. BARKASY:     Thank you, Your Honor.

25        (Recess from 4:41 p.m. until 4:50 p.m.)
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1               THE COURT:   Please be seated.   Do we have the

2    necessary counsel back to begin?     All right, go ahead, Counsel.

3               MR. BARKASY:    Thank you, Your Honor.   I worked it out

4    with Mr. Manzo, and I just want to read in a few sentences that

5    begins on page 178 in the final transcript, and in one -- on

6    page 174 at line 9 in the rough transcript that I have:

7    "Q.   Just a few questions on another topic which is the

8    company's tort liability.     Are you able to tell me the amount

9    budgeted this year for product liability claims?

10   "A.   We have a liability on our balance sheet that's

11   actuarially determined based upon future estimated payments

12   under their product liability claims.

13   "Q.   Are you able to tell me what that amount is for this year?

14   "A.   The exact amount I don't know.    My estimate is about 650

15   million dollars, in that range.

16   "Q.   And do you know how much of that is actually expended for

17   this year?

18   "A.   That is just a liability that remains on our books as of

19   current.

20   "Q.   But do you know what has been expended this year?

21   "A.   Cash payments.    Generally cash payments on product

22   liability claims range in the 2 to 250 million dollars

23   annually, and it fluctuates month-to-month based upon when

24   cases are settled."

25         My question about Mr. Kolka's testimony, Mr. Manzo, is, is
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1    it accurate to the best of your knowledge?

2    A.     Sorry to say I don't know.     The information does exist, I

3    know I have seen it, but I don't recollect the exact amount on

4    the balance sheet as of 3/31, the latest balance sheet that

5    I've seen.     I know there is a specific amount on the balance

6    sheet, and he references 650 million, but I don't -- I don't

7    have a recollection if that's an accurate number or not.

8    Q.     Do you have any reason, sitting here on the stand today,

9    to doubt the accuracy of his testimony?

10   A.     I read what he said, I don't at all.      Except that on that

11   specific number, I don't know if he looked himself at it or

12   not.    It sounds as though he estimated it, but you know, he

13   would have a far better appreciation as a CFO of that

14   particular number than I would without going back and taking a

15   look at it.

16   Q.     Okay.   Thank you, Mr. Manzo.

17              MR. BARKASY:    Nothing further, Your Honor.

18              THE WITNESS:    You're welcome.

19              THE COURT:    All right.    Anyone else?

20              All right.    Those of you that are going to want to

21   cross-examine, come closer to the front, please, so we don't

22   have a delay.

23              MR. MCRORY:    Good afternoon, Your Honor, Russell

24   McRory, Robinson Brog Leinwand Greene Genovese & Gluck,

25   attorneys for Performance Dodge and other dealers.
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3    Q.   Good afternoon, Mr. Manzo.

4    A.   Good afternoon.

5    Q.   I won't keep you too long.

6    A.   Okay.

7    Q.   Were you part of discussions with senior management at

8    Chrysler concerning the split of assets and liabilities between

9    New Chrysler and Old Chrysler?

10   A.   Yes, I was.

11   Q.   And in any of those discussions did they involve the size

12   of the dealer network?

13   A.   No, not in the discussion regarding which assets and

14   liabilities would go into NewCo and which ones would stay

15   behind in Chrysler.    In that discussion there wasn't a

16   discussion regarding the number of dealers that would stay or

17   that would go.

18   Q.   Okay.   In any of your discussions with senior management

19   to Chrysler did that topic come up?

20   A.   Yes.    One specific meeting that I was at where the topic

21   of identifying dealers that would not go into NewCo was

22   discussed.

23   Q.   When did that meeting occur?

24   A.   I don't recall the exact date, but it was certainly within

25   the last two to four weeks.
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1    Q.     Who was present at that meeting?

2    A.     I believe Messrs. Press, Nardelli, Kolka.   There may have

3    been others, but certainly those three I believe were there at

4    that meeting.

5    Q.     And what do you recall was the conclusions arrived at at

6    that conference?

7    A.     There weren't any conclusions.   There was a discussion

8    among the three people that I mentioned regarding the company's

9    process in discussing how it was going about evaluating which

10   specific dealers would be going into NewCo and which ones were

11   deemed to be not going into NewCo.      And then as part of that

12   there was a discussion about Fiat's involvement in looking at

13   the list that would be developed of dealers that would not be

14   going into NewCo.

15              THE COURT:   All right, those of you along the wall

16   there, someone is leaning on the electrical switches that shut

17   off some of the lights, you just pushed them all off.     Thank

18   you.

19   Q.     During this meeting was the topic discussed as to what

20   parties-in-interest requested the reduction of the Chrysler

21   dealer network?

22   A.     Not that I recollect.

23   Q.     You just testified a moment ago that Fiat's involvement in

24   looking at the list was discussed at that meeting.     What was

25   Fiat's involvement in terms of the preparation and the
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1    dealerships chosen for that list?

2    A.   I don't know, because I was not involved in any meetings

3    with them, but that one meeting that I did attend, which was a

4    meeting on other issues, which at the end of the meeting there

5    was a discussion about dealers, it was discussed -- I think Mr.

6    Press may have mentioned it -- that Fiat had engaged -- that is

7    had engaged in discussions with Chrysler about the dealers and

8    was involved in looking at, you know, which ones would go into

9    NewCo and which ones would ultimately stay behind.

10   Q.   Was that a new discussion with Fiat or had you heard about

11   those discussions for some time?

12   A.   No, it's the first time I had heard that Chrysler was

13   speaking with Fiat regarding the dealers that would be going

14   into NewCo versus those that would be staying behind.

15   Q.   Other than Fiat are you aware of any other discussions

16   between Chrysler and any of the parties-in-interest?    And by

17   those I mean the U.S. government and any of its agencies or the

18   United Auto Workers?    Are you aware of any discussions with

19   those parties?

20   A.   No, I'm not.    The only reference I remember is the one

21   that I just cited.

22   Q.   And have you yourself had or are you aware of any

23   discussions with representatives at Chrysler -- at Fiat rather,

24   concerning the size of the dealer network?

25   A.   No, I didn't participate in any of those discussions.
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1    Q.   And same question for the U.S. government?

2    A.   Correct, I did not participate.

3    Q.   Did you ever see Fiat's term sheet that you've testified

4    about earlier today?

5    A.   I've seen several term sheets.    I've seen one that was the

6    original term sheet that was done between Chrysler and Fiat,

7    and I've seen the revised term sheet of the Fiat Chrysler

8    alliance.   So I've seen both.

9    Q.   Did Fiat's original term sheet contain any terms regarding

10   the size of Chrysler's dealer network?

11   A.   I don't recall if it did or did not.

12   Q.   Did you recall if any revised term sheets just -- were

13   there more than one revised term sheets, or only one revised

14   term sheet?

15   A.   Well, there were drafts of the term sheets.   When I

16   referenced two I was referring to one based on the first term

17   sheet that Chrysler and Fiat had done, and then a subsequent

18   deal with certain of the terms of that term sheet changed.    But

19   I don't recall in either -- on any of the drafts that I've seen

20   whether or not there was a section regarding, you know, number

21   of dealers or reference to dealers.

22   Q.   As far as you know has Fiat taken any position on the size

23   of the dealer network it's receiving from Chrysler or Old

24   Chrysler?

25   A.   The only thing I know is again that same discussion where
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1    I believe it was Mr. Press mentioned that, you know, Fiat is

2    involved in the review of the dealer situation, and some words

3    along the lines of you know, generally on board with how we're

4    approaching, you know, which dealers would go into NewCo and

5    which would stay behind.

6    Q.   You testified earlier that Chrysler wanted to accomplish

7    its restructuring outside of bankruptcy, is that correct?

8    A.   That is correct.

9    Q.   And were those attempts continuing up until the very last

10   second?

11   A.   Literally until the early morning hours of the day that we

12   filed, yes.

13   Q.   And was the primary stumbling block making a deal with the

14   senior secured lenders?

15   A.   I believe that was the one we were most focused on.    I

16   wasn't aware of any others.

17   Q.   Okay.    For the sake of argument, if Chrysler had made a

18   deal with the senior secured lenders and Chrysler did not go

19   into bankruptcy, did Chrysler's deal with Fiat contain any

20   provisions regarding how the -- what the size of the dealer

21   network would be?

22   A.   Again, I -- without looking at the latest term sheet I

23   don't recall if there was a section in the term sheet that

24   talked about, you know, the dealers that would go over to NewCo

25   versus the ones that would stay behind.
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1    Q.   Was there any discussions regarding an out-of-bankruptcy

2    restructuring for Chrysler that involved a reduction in the

3    dealer network?

4    A.   I don't recall discussions about it, but I can tell you in

5    the preparation of the various business plans that we

6    participated in with Chrysler, there was a program that is in

7    Chrysler where they forecasted over time, you know, a reduction

8    of certain number of dealers over time as part of the regular

9    business planning process, and that was oftentimes discussed.

10   Q.   But as far as you know, Fiat never made it a condition to

11   its transaction with Chrysler that the dealer network be

12   reduced?

13   A.   Not that I recall.

14   Q.   Do you know of any party-in-interest that has made it a

15   requirement for the sale transaction that the dealer network be

16   reduced?

17   A.   Not that I'm aware of.

18              MR. MCRORY:   Thank you, no further questions.

19              THE COURT:    All right, anyone else?

20              MR. ESSERMAN:   Good evening, Your Honor, my name is

21   Sandy Esserman; I filed an objection on behalf of Patricia

22   Pasquale, who's a member of the unsecured creditors' committee

23   and a tort claimant on the committee, and we've also filed a

24   brief in support of our objection.     I have a few questions to

25   ask of this witness.
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1               THE COURT:   Go ahead.



4    Q.   Mr. Manzo, you're aware that there are tort claims

5    currently against Chrysler, is that correct?

6    A.   Yes, I am.

7    Q.   Okay.   And some of those claims are asbestos claims.

8    You're aware of that?

9    A.   I have heard that, yes.

10   Q.   Okay.   Under the plan that has been negotiated, what

11   happens to those claims?

12   A.   I believe all the tort liability claims are staying behind

13   in what we refer to as Old Chrysler.

14   Q.   Okay.   So, if someone has a claim filed now, they would

15   recover against Old Chrysler and not New Chrysler; is that

16   correct?

17   A.   That is correct.

18   Q.   Okay.   Some of these tort claimants and asbestos claimants

19   have also sued dealers.    Are you aware of that also?

20   A.   No, I was not aware of that.

21   Q.   Under the plan, dealers that are assumed are indemnified

22   against Chrysler tort claims, is that correct?

23              MR. SULLIVAN:   I would object, Your Honor, to the use

24   of the word "plan."

25              THE COURT:   Yeah, I'm not --
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1             MR. ESSERMAN:   The sale.

2             THE COURT:   You're talking about the --

3             MR. ESSERMAN:   The sale.

4             THE COURT:   -- the sale agreement?

5             MR. ESSERMAN:   Yes.

6             THE COURT:   The -- what's been identified as a MTA?

7             MR. ESSERMAN:   Yes.

8             THE COURT:   All right, go ahead.

9    Q.   Okay.

10   A.   I believe that's correct.

11   Q.   Okay.   So if there is a tort claim in litigation currently

12   and it is against a dealer and Chrysler and there is liability

13   asserted against a dealer that has been assumed -- a dealer

14   contract that has been assumed, what happens to that claim?

15   Where does that claimant look?

16   A.   Well, I would have to speak with counsel who is working on

17   that in terms of how it's documented.   It sounds as though it

18   would be in NewCo as a liability, but I would have to check

19   with counsel to go through that.

20   Q.   Let's take the same example, a tort claim in the system

21   now, an asbestos claim against Chrysler and a dealer that has

22   been rejected.   Where does that claimant look for compensation?

23   A.   I believe that would be a claim against what I refer to as

24   Old Chrysler.

25   Q.   And under the sale, what Chrysler anticipates is filing a
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1    plan and having a bar date for claims, including tort claims.

2    Is that your understanding?

3    A.   Yes, that is my understanding.

4    Q.   Okay.    So if someone has a tort claim in the system and

5    they can file a claim, they're going to file it against OldCo

6    or Old Chrysler.    Is that your understanding also?

7    A.   It is.

8    Q.   Okay.    And the bar date will be a definite bar date and

9    will be noticed nationwide, I assume.   Is that also your

10   understanding?

11   A.   That would be typically how it would be done, yes.

12   Q.   What happens to a tort claimant, and particularly an

13   asbestos claimant, someone that is injured from asbestos

14   exposure for which they assert liability against Chrysler, that

15   arises after the bar date?    What happens to that claimant?

16   A.   Well, I'm sorry, I would have to defer to bankruptcy

17   counsel on that one.

18   Q.   Was that a matter of any discussion in putting the sale

19   together?

20   A.   Not that I was involved in.   It may have been, but I just

21   wasn't involved in that.

22   Q.   Do you know who would know the answer to that question?

23   A.   I think bankruptcy counsel or counsel from Jones Day would

24   probably be able to answer that question.

25   Q.   Do you think it would be fair to that claimant if it were
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1    to arise after the bar date to have to look to OldCo or Old

2    Chrysler for compensation?

3    A.   Again, I don't know how that is going to be legally

4    structured, so I don't know how to answer that question.         I'm

5    sorry.

6    Q.   Under the sale agreement, Mr. Manzo, could that claimant

7    that arises after the bar date -- that asbestos claim that

8    arises after the bar date look to NewCo or Fiat for

9    compensation?

10   A.   Again, I think -- I would have to defer to counsel on

11   that.    I'm sorry, I just -- it's a technical question involving

12   the bankruptcy and other things.      I'm just not that familiar

13   with that.

14   Q.   Does anyone on the business side of Chrysler -- have you

15   been involved in any discussions with anyone on the business

16   side of Chrysler on how asbestos claims are to be treated?

17   A.   Other than what I answered regarding as, you know, as has

18   been said general pre-petition unsecured claims.       Nothing other

19   than that.

20               MR. ESSERMAN:    No further questions, Your Honor.

21   Thank you.

22               THE COURT:    All right, thank you.   Anyone else?   Any

23   redirect?

24               MR. CULLEN:    Very briefly, Your Honor, if I may.

25               THE COURT:    Go ahead.
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3    Q.     If I could direct you to the book that that Mr. Kurtz gave

4    you at tab 6.

5    A.     Okay.

6    Q.     The e-mail of 3/25/2009 and to number 1 where it says, "We

7    need a deal with Fiat today; that will likely be done."      You

8    were told pretty much take it?

9    A.     Yes.

10   Q.     Do you see that?

11   A.     I do.

12   Q.     To your knowledge, was there a final deal with Fiat that

13   day?

14   A.     I don't recall on a specific day.

15   Q.     Did negotiations -- after the end of March, did

16   negotiations with Fiat continue right up until the eve of

17   bankruptcy?

18   A.     Continue -- you know, the negotiations were ongoing

19   throughout this entire process.      And again, I don't recollect a

20   specific date without go -- you know, without going back and

21   talking to people about when the negotiations were completed.

22   Q.     If I could direct your attention to number -- to the tab

23   number 8:      the e-mail trail from Matt -- between Matt Feldman

24   and yourself.      Do you see that, sir?

25   A.     I do.
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1    Q.   Where it says at the top, "It's over."         What happened with

2    respect to the subject matter of this e-mail chain after Mr.

3    Feldman's statement that it was over?

4    A.   I recall speaking with Mr. Feldman.         And once again --

5                MR. KURTZ:    Objection, hearsay.

6                THE COURT:    What's the hearsay objection?

7                MR. KURTZ:    That --

8                THE COURT:    We're going to accept -- we're not

9    looking, at least I don't think it's being introduced for to

10   truth of the statement made.        This witness can testify as to

11   what he heard.    You know, I'm not -- I mean, articulate your

12   objection.    I mean, is it being         admitted -- being sought to

13   be admitted or heard into evidence as the truth of what Mr.

14   Feldman said?

15               MR. KURTZ:    I believe so.

16               MR. CULLEN:   No, Your Honor.     It's merely offered to

17   show that things happened after the statement that it was over,

18   and the things that happened included discussions about the

19   subject matter of this e-mail chain.

20               THE COURT:    All right, I'll allow him to answer the

21   question.

22   Q.   Could you describe the conversation?

23   A.   Yes.    I spoke to Mr. Feldman, after this e-mail that I

24   received, and explained to him that in speaking with Mr.

25   Nardelli that it was the company's desire to not interfere and
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1    to make the negotiation more confusing, but rather to attempt

2    to intervene to resolve the situation amicably so that Chrysler

3    could effectuate an out-of-court restructuring.    Mr. Feldman

4    indicated that --

5             MR. KURTZ:     Objection.   I mean, Your Honor, how is

6    this not being offered for the truth of the matter asserted?

7             MR. CULLEN:    Your Honor, if I may, I think the theme

8    of these e-mails is that -- and what they're being introduced

9    for by the objectors is that Mr. Feldman says it's over and

10   that means it's over and there's no more negotiation with

11   respect to that.

12            THE COURT:     Then you can ask him questions about what

13   he know -- what negotiations may have gone on after it.

14   Q.   What was your information or understanding about

15   negotiations that went on after that?

16   A.   After this email --

17            MR. KURTZ:     Your Honor, just so I can interpose a

18   foundation objection, because I know firsthand there was no

19   such negotiations.    I'd like to hear, like I said, a foundation

20   to suggest there was.    And I can produce an    e-mail where the

21   government said that.

22            THE COURT:     Well, lay a foundation for the witness'

23   knowledge of the mail; what may have happened after.

24   Q.   What would be the basis for any knowledge you have of

25   events that happened after the date of -- after the time of
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1    this e-mail with respect to the amount of compensation that was

2    to be offered to the first lienholders in connection with the

3    sale -- in connection with the transaction?

4    A.   The only information I have is from Mr. Feldman where he

5    suggested that our involvement might make the situation worse

6    and as far as the Treasury was concerned, they were sticking to

7    their proposal of two billion dollars, notwithstanding -- he

8    mentioned a higher amount was offered, and they were taking

9    that off the table and reverting back to their prior position

10   of two billion.   And as far as they were concerned at that

11   point they -- senior secured lenders could either take that

12   transaction or, if they preferred, to go ahead and liquidate

13   the company, the Treasury would not stand in the way of that;

14   would not provide the financing for the NewCo transaction and

15   would permit the senior secured creditors to exercise their

16   rights.

17              MR. KURTZ:    Objection, move to strike.

18              THE COURT:    All right, it is hearsay.    Motion

19   granted.

20   Q.   Do you have any basis for understanding what the higher

21   amount involved in those discussions was?

22              MR. KURTZ:    Objection, foundation, hearsay.

23              MR. CULLEN:   I'm asking does he have any basis.

24              THE COURT:    He may answer the question if he has any

25   basis of knowledge.
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1             THE WITNESS:    It was told to me by --

2             MR. KURTZ:    Objection.

3             THE COURT:    Slow down.   It was -- the only basis is

4    what you were told by someone else?

5             THE WITNESS:    It was told by me, Your Honor, from an

6    official from the automotive task force who was negotiating

7    directly with the first lien lenders.

8             THE COURT:    All right.   It's going to be hearsay,

9    then.

10            MR. CULLEN:    I would -- Your Honor, with respect to

11   these discussions, I would say that it's both res gestae and

12   state of mind.   If they're saying that we have advocated

13   fiduciary duty responsibility to our creditors and we think

14   that our -- that the government is offering those creditors

15   more money, it goes to our state of mind with respect to our

16   fiduciary duties and whether or not those fiduciary duties are

17   being protected, whether or not the government is responding

18   appropriately to concerns that we have raised and whether or

19   not it's appropriate for us to do more.

20            The state of our knowledge with respect to what the

21   government is doing affects our state of mind with respect to

22   what we should be doing.   If it's our understanding that the

23   government has offered 250 million more dollars, then that

24   understanding is relevant to whether or not we were pursuing

25   our fiduciary duties in good faith.
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1                THE COURT:    That may be, but that's not the question

2    he asked the witness.

3                MR. CULLEN:    Well, was it -- well, may I ask that

4    question?

5                MR. KURTZ:    This is all speech, Your Honor?

6                THE COURT:    Excuse me?

7                MR. KURTZ:    All speech?    I mean, that question.   I

8    didn't hear a question.

9                THE COURT:    Well, I guess we'll hear one.    State the

10   question, please.


12   Q.   In terms of the interests of the first lienholders to whom

13   the estate had obligations, was it your understanding, in light

14   of the fiduciary duties of the company, that there were -- that

15   they were indeed offered more money?

16   A.   Yes, that's correct.      I was told they were offered 250

17   million and more additional cash on top of the 2 billion as a

18   final offer to reach an out-of-court settlement.

19               MR. KURTZ:    Objection, move to strike.

20               THE COURT:    On what basis?

21               MR. KURTZ:    Hearsay.

22               THE COURT:    Well, it forms his opinion as to what,

23   you know, his fiduciary obligations with respect to the company

24   which you have put at issue.         So even if it's not true and 250

25   million wasn't offered, doesn't it go to whether the actions he
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1    takes if that's what he believes is going on?

2             MR. KURTZ:    If it is not offered for the truth of the

3    matter asserted, Your Honor.

4             THE COURT:    All right.   It's so accepted, not for the

5    truth of the matter.

6             MR. CULLEN:    Thank you, Your Honor.

7    Q.   Do you have an understanding of the term credit bid in the

8    context of a 363 sale, Mr. Manzo?

9    A.   I do.

10   Q.   Could you tell me what that understanding is?

11   A.   My understanding is that a secured creditor may opt to bid

12   in kind their debt in the potential opportunity to buy certain

13   assets being offered up for auction in the 363.

14   Q.   And in terms of the amount that would be offered by the --

15   in a credit bid by the first tier secured in this case, would

16   the amount of the offer be the market value of their securities

17   or the face value of their securities, in your understanding?

18   A.   I would believe it would be the face value of their

19   securities.

20   Q.   So in this case, 6.9 billion dollars?

21   A.   Or some portion of that.

22   Q.   Right.   And if, as has been suggested by various analyses

23   that were presented to you, the company was worth, on a

24   liquidation basis, nineteen or twenty-one billion dollars, is

25   it your understanding that a credit bid would be a very viable
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1    financial step for a pure financial investor?

2               MR. KURTZ:    Objection, leading.    Outside the scope of

3    any report or declaration we got.     Irrelevant.

4               THE COURT:    Well, it's not outside of the scope of

5    your cross.   I mean, you addressed this value on cross,

6    correct?

7               MR. KURTZ:    Your Honor, I addressed value; I didn't

8    address the subject to credit bidding, and nor do I see how

9    it's relevant to an objector here who doesn't have 20

10   billion -- you know, doesn't have 6.9 billion to credit bid.

11   And it strikes me also as a question of law, Your Honor.

12              THE COURT:    Excuse me?

13              MR. KURTZ:    As a question of law.    How you credit

14   bid, what the face amount is, his whole line of questioning is

15   objectionable.

16              THE COURT:    All right, where is this line of

17   questioning going?

18              MR. CULLEN:    Without indulging in a speech, I think

19   the suggestion of the values presented to Mr. Manzo of nineteen

20   billion dollars, of twenty-one billion dollars were meant to

21   suggest that his value -- that his liquidation analysis was

22   drastically low.   My question about the credit bid, like my

23   questions on direct about the existence of other bidders in the

24   process, is directed at the sanity check of how the market, how

25   people with money, how people with the equivalent of money,
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1    viewed these values.

2                It seems to me a relevant question and a relevant

3    consideration that if we had 19 billion dollars of assets

4    around and I could cash in my 7 -- my 6.9 billion dollars of

5    debt to pick it up without cavil, that that is a reality check

6    on what the values are viewed by the marketplace and on the

7    liquidity analysis.      That's the tendency of the question.

8                MR. KURTZ:    Your Honor, the two valuations at issue

9    are as follows:    One was performed by Greenhill, which is the

10   financial expert of Chrysler.      There is no testimony, nor any

11   evidence, nor can there be, that that valuation was shared with

12   the banks and two, Chrysler and Cerberus’ valuation.      And

13   likewise, there's no evidence or testimony, nor can there be,

14   that that was shared with the banks.      So the whole premise that

15   the banks were aware of this value and didn't credit bid is

16   misguided, Your Honor.

17               The valuation materials that have been submitted

18   belong to Chrysler and its financial experts and they say what

19   they say.    There's no way to say that they are not viable or

20   say something different simply because the banks weren't aware

21   of them and didn't credit bid.

22               Nor do I think there's any appropriate linkage

23   between whether senior secured creditors wanted to take over an

24   automotive company or whether they simply wanted the estate to

25   discharge its obligation to maximize value in their favor.
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1               THE COURT:    All right.    I really just think the

2    question itself is far too attenuated to add anything to this

3    process.

4               MR. CULLEN:    All right.

5               THE COURT:    All right?

6               MR. CULLEN:    That's all I have, Your Honor.    Thank

7    you.

8               THE COURT:    All right, thank you.   Recross?


10   BY MR. KURTZ:

11   Q.     I'd like to direct your attention to what is in the fourth

12   tab of a binder that was prepared for Mr. LaSorda.

13              MR. KURTZ:    And, Your Honor, can I approach to the

14   extent that I might be able to help the witness find it?

15              THE COURT:    Go ahead.

16              MR. KURTZ:    I'd like to have this marked as Pensioner

17   Exhibit number 11, and we'll do that.

18   (Pensioners' Exhibit 11, e-mail chain from 4/10-11/09, was

19   hereby marked for identification as of this date.)

20   Q.     Mr. Manzo, could you take a second to review that e-mail

21   chain from April 11th, 2009?

22   A.     Yes, I'm reading it now.

23   Q.     And April 10th.

24   A.     Okay.   I'm sorry; I didn't read the first page.     Okay,

25   I've read it.
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1    Q.   Okay.    First place, is it fair to say that the prospect of

2    an alliance with GM was still viable as of April 11th, 2009?

3    A.   Yes.    We at Chrysler thought notwithstanding the

4    automotive task force concluded that our stand-alone -- that

5    the Chrysler stand-alone plan was not viable, that we believed

6    it made sense to pursue an alliance -- a merger with General

7    Motors.     And so the e-mail traffic that you see is talking

8    about could the information that Chrysler had previously signed

9    with respect to a nondisclosure agreement, could that

10   information regarding the merger or alliance between GM and

11   Chrysler be shared with outside third parties like the

12   automotive task force.

13   Q.   My question was just whether the prospect of an alliance

14   with GM was still viable in mid-April, and the answer is yes,

15   right?

16   A.   Chrysler believed it was an option that should be pursued.

17   Q.   Okay.

18   A.   So that's correct.

19   Q.   And you were reporting, on the front page of this e-mail

20   chain, that you had seen an e—mail from Holly.    Who is Holly?

21   A.   Ms. Holly Leese.

22   Q.   And who is Holly Leese associated with?

23   A.   She is general counsel of Chrysler.

24   Q.   Where she notified Jones Day and SRZ, who is SRZ?

25   A.   Schulte Roth & Zabel, a law firm.
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1    Q.   And what was Schulte Roth's role in all this?

2    A.   They are counsel, as is Jones Day, to Chrysler.

3    Q.   Okay.   And that she notified Jones Day and SRZ about the

4    government contingency plan with GM.   What was the contingency

5    plan by the government?

6    A.   I was referring to in discussions with the government,

7    their request for us to provide them with certain information

8    on various component parts of Chrysler for them to evaluate and

9    to use in their evaluation of General Motors.

10   Q.   he next sentence says, "I asked her to keep it hish-hush."

11   Is that --

12   A.   It was meant to be hush-hush.

13   Q.   Okay.   And why were you asking her to keep it hush-hush?

14   A.   Because this was a highly confidential matter.    Certainly,

15   in the middle of all the negotiations that were going on within

16   Chrysler it was -- it would not be helpful for this information

17   to be taken out of context.   It was certainly one of the

18   options that always we at Chrysler would and did look at to

19   maximize value, but we didn't want it necessarily to be taken

20   out of context by people outside in the public markets.

21   Q.   The next sentence is, "When I told Bloom the cost of five

22   to seven billion for two to three months without sales he was

23   beaming ear to ear."   What did you mean when you wrote that?

24   A.   Ron and I had spoken about the cost of Chrysler being

25   either in a Chapter 11 or not operating its manufacturing
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1    facilities for a period of two to three months and I indicated

2    a range of five to seven billion dollars for the cost of that.

3    And my reference is I actually thought he thought it could be

4    higher than that, which so my reference was he was beaming ear

5    to ear in the sense of that's a -- probably a smaller number

6    than he thought.

7    Q.   That -- beaming ear to ear is a description for a smile,

8    right?

9    A.   Yes.

10   Q.   Okay.   Now, you noted "that Bloom clearly doesn't want to

11   do this, it was a Rattner idea."   Is that true?

12   A.   That was my supposition that, you know, the discussions

13   regarding what other options that the government as a

14   prospective lender to a third-party acquirer, whether Fiat, GM,

15   or somebody else, was an idea that the automotive task force

16   had and, you know, my speculation was that it may have been

17   coming from Mr. Rattner as compared to other people in the

18   automotive task force team.

19   Q.   You say, "I've kept all the iterations of the models,

20   comparisons and requests from U.S. Treasury."   Right?

21   A.   Yes.

22   Q.   Why were you doing so?

23   A.   Why was I keeping copies of what we've given them?

24   Q.   Why were you keeping all the iterations of the models, the

25   comparisons and the requests from UST?
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1    A.   We do that routinely in terms of making sure there's, you

2    know, information that we give to third parties so that when

3    there are follow up calls and discussions from those third

4    parties that information is readily available to go through.

5    Q.   So, does Capstone continue to maintain all iterations of

6    models and comparisons and requests from the United States

7    Treasury Department?

8    A.   We have a -- routinely keep information that we distribute

9    out and we routinely purge and do not keep certain information

10   that we deem not pertinent.

11   Q.   My question is whether you kept all the iterations of the

12   models, comparisons and requests from the United States

13   Treasury Department?

14   A.   I don't know the answer to the question, but I could

15   certainly find out.

16   Q.   Did you produce any of those models or iterations in this

17   case?

18   A.   I don't recall.

19   Q.   Do those models and iterations show value with respect to

20   a potential alliance with GM?

21   A.   The reference here is not so much into value, but the

22   reference here in these analyses had to do with cash flow.

23   Q.   Well, okay.   And cash flow can be used to derive value,

24   right?

25   A.   That's correct.
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                              CHRYSLER LLC, et al.

1    Q.   You can use it -- you can perform a discounted cash flow

2    analysis, right?

3    A.   That would be correct.

4    Q.   Or you can provide -- you can perform a comparable company

5    analysis by converting it into some form of earnings, right?

6    A.   That's correct.

7    Q.   Do you have any recollection as to any of the financial

8    numbers or values that were reflected in any of these models

9    and comparisons from the United States Treasury about a

10   Chrysler/GM alliance?

11   A.   I don't recall the specific financial results of the

12   models that were done.

13   Q.   Were the valuations associated with a Chrysler/GM alliance

14   higher than the valuations associated with this 363 sale?

15   A.   I believe they were.

16   Q.   By how much?

17   A.   I don't recall an exact amount, but I do believe they were

18   higher.

19   Q.   Do you have a general sense in how much higher it was?

20   A.   I don't, but I can tell you it was absolutely one of the

21   options that we continue to believe at Capstone, and I know

22   that Chrysler continued to believe throughout the discussions

23   that that was a viable option that should be pursued because it

24   had the potential of maximizing the value of the Chrysler

25   assets.
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1    Q.   What kind of recovery would the senior secure creditors

2    receive in a GM/Chrysler alliance?

3    A.   We didn't do that type of recovery analysis; the analysis

4    was more about the cash flow benefits and cost reduction

5    benefits that ultimately would flow into cash flow by putting

6    the two companies together.   We didn't go down as far as trying

7    to allocate how much debt the combined companies would have and

8    which creditor would get notes, cash, equity, et cetera.   It

9    never went that far down.

10   Q.   Do you recall whether the value would have supported a

11   payment in full to the senior secured creditors?

12   A.   Again, it wasn't that type of an analysis, because it

13   included how much the combined synergies would be, and that --

14   and by definition you would have to take into effect the other

15   liabilities that would exist on General Motors, which I was not

16   that knowledgeable about at that point.

17   Q.   Do you have any understanding about what recoveries might

18   have been implied for the senior secured lenders had there been

19   a GM/Chrysler alliance?

20   A.   No.   As I mentioned, we had not done any of those

21   calculations.

22   Q.   The information, however, could be derived from the models

23   and iterations that you have in your possession, though, right?

24   A.   The information, to your question, I don't think could be

25   derived because you have to further develop that analysis and
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1    begin making assumptions with respect to debt restructuring:

2    how much, how much of it would be General Motors' debt, how

3    much of it would be Chrysler debt and then you certainly would

4    have to have a bunch of negotiations between different groups

5    to do that.    This -- these analyses were really to determine

6    the size of the pie, so to speak.    That is, how much cash flow

7    would be available from the Chrysler side if there were a

8    merger with GM.

9    Q.   And what was the size of the pie that would have been

10   available to the Chrysler side?

11   A.   Again, I'm sorry, without going back and looking

12   specifically, I don't recall a specific dollar amount.

13   Q.   Can you explain why that wasn't produced in this

14   proceeding?

15   A.   I don't know if it was; I'd have to take a look at the

16   listing.     I don't know if we still have that or not.    I'd have

17   to take a look.

18   Q.   Can you turn the page, please?

19   A.   Okay.

20   Q.   The e-mail from Mr. Nardelli says, "Guys, I sense some

21   panic if the UST is starting all over again at this point."

22   Who was it that was panicking about the prospect that Treasury

23   was considering a new form of transaction and alliance with GM

24   and Chrysler?

25              MR. CULLEN:   Objection, foundation.   I don't think
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1    that the premise is in the testimony.

2                THE COURT:    I can't hear what he's saying.

3                MR. CULLEN:    I'm sorry.   Objection, foundation, form.

4    I don't think the premise he asserted is established in the

5    testimony.

6                THE COURT:    All right.    Restate the question.

7    Q.   My question is are you aware of who it was that was

8    panicking at Chrysler about the prospect that the U.S. Treasury

9    Department was considering going forward with a GM/Chrysler

10   alliance?

11               MR. CULLEN:    Objection, again.

12   Q.   If anyone.    Go ahead.

13               MR. CULLEN:    Objection again.    Foundation, form.     I

14   don't think he's asked a question about who was panicking at

15   what.

16               MR. KURTZ:    Your Honor, I'll read the e-mail again as

17   the predicate.    "Guys, I sense some panic if the UST is

18   starting all over again at that point."

19   Q.   That's referring to the possibility of a GM/Chrysler

20   alliance.    Right, Mr. Manzo?

21   A.   Yeah, it's in regard to an alternative transaction.

22   Q.   With GM, right?

23   A.   That's correct.

24   Q.   And Mr. Nardelli is what, he was the CEO?

25   A.   Yes, he is the CEO presently.
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                            CHRYSLER LLC, et al.

1    Q.   Is the CEO, right.   And the CEO of Chrysler says he senses

2    some panic about that, right, in his e-mail to you?

3    A.   Yeah.   And in a subsequent discussion when I called Mr.

4    Nardelli about his e-mail, he was concerned that we were on a

5    transaction with Fiat and there was a suggestion that perhaps

6    maybe an alternative transaction with the third party, namely

7    GM, on certain parts of the Chrysler business might be being

8    evaluated by the U.S. Treasury automotive task force.

9    Q.   Mr. Nardelli continues, "It's a shame -- I set such a

10   short time line and now running out of time."    That's what he

11   said, right, with an explanation point in fact, correct?

12   A.   That's his e-mail, correct.

13   Q.   You agree it was a shame that the GM/Chrysler alliance

14   wasn't -- wasn't able to be taken further?    Or what --

15            MR. KURTZ:   -- strike that.

16   Q.   You agree it's a shame that the GM/Chrysler alliance was

17   not taken further?

18   A.   No, because we were the ones in right around and a little

19   bit after this time period, about a week later, who actually

20   proposed back to the automotive task force a transaction be

21   reevaluated with respect to Chrysler and General Motors.

22   Q.   Mr. Nardelli said to you, "Don't they need to stay on the

23   current path, even if it is less viable than the plan we

24   submitted on February 17th?"   What was the plan that was

25   submitted on February 17th?
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                           CHRYSLER LLC, et al.

1    A.   That was the stand-alone Chrysler viability plan that we

2    were required to submit to the automotive task force as part of

3    our loan agreement.

4    Q.   Mr. Manzo, who was it that determined that Chrysler/GM

5    should not go forward in an alliance?

6    A.   The automotive task force concluded and told us that they

7    were not prepared to provide financing to accomplish that

8    transaction and the required financing to consummate that

9    transaction.   So, it was the automotive task force.

10            MR. KURTZ:   Your Honor, I have no further questions

11   for the witness.   I would say that I believe that he should

12   remain available as a witness and that the hearing should be

13   continued and the record left open until such time as they can

14   produce to us the important valuation materials that we can

15   analyze and come back and complete the cross-examination then.

16            THE COURT:   Well, that assumes it exists.

17            MR. KURTZ:   It assumes that the materials that the

18   witness said, "I have kept them" would still be true, and we

19   haven't gotten any testimony that it's not true, Judge.       So,

20   true, I suspect that with electronic -- you know, means of

21   recovery or filing and the kinds of people it probably was sent

22   around to that it's quite likely that this material could be

23   found and produced promptly.

24            THE COURT:   Well, we'll see if it's found.    All

25   right, any further recross from anyone?   All right, you may
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1    step down.    Thank you.

2                THE WITNESS:    Thank you, Your Honor.

3                THE COURT:    All right.    Who is the next witness?

4                MR. HOLLEY:    Your Honor, Steve Holley, from Sullivan

5    & Cromwell, for Fiat.      The next witness is Alfredo Altavilla.

6    And I believe --

7                THE COURT:    Wait, wait don't call anybody yet.

8                MR. HOLLEY:    Okay.

9                THE COURT:    And how long will this testimony be?

10               MR. HOLLEY:    I'm assuming on direct, Your Honor, it

11   would take about twenty minutes.         And what's our estimate on

12   cross?

13               UNIDENTIFIED SPEAKER:      Twenty minutes.

14               UNIDENTIFIED SPEAKER:      Ten minutes over here.

15               MR. HOLLEY:    Ten minutes.

16               THE COURT:    Anyone else?

17               MR. CULLEN:    Yes, Your Honor.

18               THE COURT:    Well, wait, wait.     I heard your

19   estimate.

20               MR. CULLEN:    Sorry.

21               THE COURT:    Someone in --

22               UNIDENTIFIED SPEAKER:      Yes, ten minutes, Your Honor.

23               THE COURT:    I heard yours.    Yes, thank you.

24               UNIDENTIFIED SPEAKER:      Ten minutes, Your Honor.

25               THE COURT:    All right.    We'll go through -- I think
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1    we can go through this testimony and then -- or the debtor.

2    Will the debtor intend to or anyone else examine this witness?

3                MR. CULLEN:   No, Your Honor.

4                THE COURT:    All right.

5                MR. CULLEN:   I don't believe so, but there's always a

6    surprise.

7                THE COURT:    I hope not.   We'll go -- we'll complete

8    this witness and then we'll probably take an hour break.       And

9    who is the next witness after that?

10               MR. CULLEN:   The next witness after that will be Mr.

11   Chapman, the independent member of the board of managers of

12   Chrysler.

13               THE COURT:    All right, we'll see if we get to him

14   tonight.    Well, let's just proceed --

15               MR. CULLEN:   Mr. Chapman --

16               THE COURT:    Yes, sir?

17               MR. CULLEN: -- would very much like to get done

18   tonight because he has other things tomorrow, but if that's

19   possible.

20               THE COURT:    Mr. Mayer, you rose?

21               MR. MAYER:    Yes.   We might want two or three minutes,

22   no more, on Mr. Altavilla.

23               THE COURT:    All right, Mr. Bienenstock?

24               MR. BIENENSTOCK:     Your Honor, we have a witness for

25   objections that haven't been resolved, and we'd love to send
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1    him home and tell him he can come back tomorrow, but obviously

2    don't want to do that if Your Honor thinks we're going to go --

3    just keep going tonight.

4             THE COURT:    Well, the debtor originally said there

5    were as many as five witnesses, is that correct?

6             MR. CULLEN:    Yes, Your Honor.   The five witnesses are

7    our witnesses.   The remaining witnesses would be Mr. Chapman,

8    the independent from the board of managers; Mr. Grady, who will

9    deal with the dealers' issues and Mr. Nardelli, who'd been the

10   chairman and CEO of Chrysler.

11            THE COURT:    I don't -- Mr. Bienenstock, I don't

12   believe we'll get through the debtor's witnesses tonight.

13            MR. BIENENSTOCK:    Okay, thank you, Your Honor.

14            THE COURT:    All right.   So call --

15            UNIDENTIFIED SPEAKER:      Your Honor, can you give us

16   some estimate as to what's happening tomorrow and the next day?

17            THE COURT:    Well, we'll begin tomorrow morning.

18   We'll go as late tonight as we can reasonably do and begin at

19   10:00 tomorrow morning and keep going with the evidence until

20   it's completed and hopefully complete it sometime tomorrow and

21   then take a break for an hour or so and then hear the

22   arguments.   And I would hope to finish it tomorrow.     If not,

23   then we'll move on to Friday.

24            All right.    Yes, Mr. Lauria?

25            MR. LAURIA:    Your Honor, if I may be heard.    One
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1    thing that we're a little confused about, we understand that

2    the debtors take the position that the Mr. Kolka's declaration

3    is in the record for all purposes, including the sale motion,

4    and if the Court will recall, we stopped examining him a long

5    time ago, and I think there was always an understanding that he

6    was going to be made available for cross with respect to the

7    sale.   And we don't know -- the debtor isn't acting like they

8    plan to call him, but we expect, if his declaration is going to

9    be in evidence for this matter. that we'll have an opportunity

10   to cross-examine him.

11             MR. CULLEN:   Your Honor, if I may.   In addition to

12   extensive cross-examination of Mr. Kolka in this court, the

13   Court will recall he was deposed for six hours the day before

14   yesterday, and at the -- and at that deposition he reaffirmed

15   his declaration and was subject to cross-examination on it and

16   was cross-examined for some six and a half hours.

17             All I said was that I thought that the -- I would

18   move the declaration into evidence for all purposes based upon

19   his previous cross-examination and based upon the deposition

20   and the cross-examination at the deposition but that I felt no

21   need to reintroduce the witness live for that purpose but that

22   the cross-examination at the deposition gave a basis to

23   introduce the declaration.

24             MR. LAURIA:   Your Honor, the deposition was

25   preparation for cross-examination and we identified Mr. Kolka
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1    as a witness that we intended to call for examination in

2    connection with the sale motion.

3             THE COURT:    All right.   Mr. Kolka -- go on.

4             MR. CULLEN:   Your Honor, it's just that I'm looking

5    in 7032 at the use of depositions in adversary proceedings,

6    which I think supports the method that the debtors propose,

7    which I think the is most expeditious way to deal with what we

8    are saying because I don't plan to introduce anything new with

9    Mr. Kolka that wasn't on the table when he was here to testify

10   last and when he was here to testify -- when he was here to

11   testify, quite frankly, twice last.    Because if you'll recall,

12   I put him up again the second day of the hearings, and when I

13   said I wasn't going to ask him anything beyond his declaration

14   they said no cross-examination at that time, but then there was

15   six hours the day before yesterday.

16            MR. LAURIA:   Your Honor, I believe Mr. Kolka is in

17   New York and available to testify.    We've noticed him and we'd

18   like to examine him.

19            THE COURT:    I think he can still be examined because

20   there's been a lot of documents produced since his earlier

21   testimony that he could be cross-examined on.    I don't know if

22   it was done during the deposition, but he should be made

23   available if you're going to move the deposition in and the

24   declaration.   He can be cross-examined on both.

25            MR. LAURIA:   Thank you, Your Honor.
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1              THE COURT:    All right.   Yes, please.   All right, give

2    your appearances, please.

3              MR. HOLLEY:   Your Honor, this is Steve Holley from

4    Sullivan & Cromwell on behalf of Fiat SpA, and the witness'

5    name is Alfredo Altavilla, A-L-T-A-V-I-L-L-A.

6         (Witness duly sworn)



9    Q.   Mr. Altavilla, if you could just move the microphone

10   closer to you so that people can hear you.

11   A.   Okay.

12   Q.   Q.   Sir, can you please state your full name for the

13   record?

14   A.   Alfredo Altavilla.

15   Q.   And what is your educational background, sir?

16   A.   I got a degree in economics in Milan.

17   Q.   And who is your current employer?

18   A.   Fiat Group SpA.

19   Q.   And what are your current responsibilities as an employee

20   of Fiat SpA?

21   A.   I am the CEO of Fiat Powertrain Technology, and I'm also

22   the head of business develop at Fiat Group Automobile.

23   Q.   Have you had any personal involvement in the acquisition

24   proposal under which New Chrysler will purchase certain assets

25   from Old Chrysler?
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1    A.   I have been the team leader of Fiat throughout the

2    negotiation.

3    Q.   And what does it mean to say that you've been the team

4    leader?

5    A.   Because of my job function as head of business development

6    I'm in charge of the scouting, the deal structuring and the

7    negotiations of all the agreements in which Fiat Group

8    Automobile has entered so far.

9    Q.   And did you have any participation, sir, in the

10   negotiation of the master transaction agreement that is before

11   the Court for approval?

12   A.   Yes, I did.

13   Q.   And could you tell me, in general terms, what the nature

14   of that involvement was?

15   A.   I was basically leading on one side the industrial team

16   that has been developing the business plan in conjunction with

17   the people at Chrysler, and I've been negotiating the two term

18   sheets, the first one with Cerberus and Chrysler; the second

19   one with, once again, Cerberus and Chrysler under the

20   supervision of the U.S. Treasury and I've been part of the

21   negotiations of the master transaction agreement so far.

22   Q.   Was the master transaction agreement and the associated

23   agreements the product of give and take among the various

24   parties?

25   A.   Yes.   For us, actually, it has been a pretty tough
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1    negotiation.    All parties have been making significant

2    concessions, and we have been among those.

3    Q.   And was the transaction negotiated at arm's length by Fiat

4    vis-a-vis the other parties?

5    A.   Yes, it was.

6                MR. PANTALEO:    Your Honor, we just note an objection

7    to the extent they're asking the witness for any sort of legal

8    conclusion.

9                MR. HOLLEY:     Your Honor, I'm just asking him whether

10   there -- what the nature of the discussions was.       I'm not

11   asking -- he's not a lawyer, I'm not asking him to conclude any

12   legal issue in the case.

13               THE COURT:    All right, go ahead.

14   Q.   Mr. Altavilla, is Fiat committed to completing the

15   transaction as outlined in the master transaction agreement and

16   the associated agreements?

17   A.   Yes, Fiat is.

18   Q.   And has that -- have those agreements been approved?        The

19   entry into those agreements, has that been approved by the

20   board of Fiat SpA in Italy?

21   A.   Yes.

22   Q.   Was there any collusion, any sort of secret agreements

23   between Fiat on the one side and Chrysler and its two

24   shareholders, Daimler and Cerberus, on the other side --

25   A.   No.
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1    Q.   -- during the negotiation of these agreements?

2    A.   Not at any point in time.

3    Q.   And I'd like to shift to a slightly different topic now.

4    Can you tell the Court how Fiat sees New Chrysler fitting into

5    Fiat's existing global operations?

6    A.   Well, the logic of -- the rationale of the deal is

7    actually pretty simple.    We have what they don't have.   We are

8    where they aren't.    And they have what we don't, and they are

9    what we aren't.    It's very simple.

10        We are strong in small and medium cars and fuel efficient

11   powertrain, they -- Chrysler is strong in crossover SUVs where

12   we don't have any platform.    Chrysler is strong in V6 gasoline

13   engines, which we don't have, and in automatic transmissions.

14   Fiat has a very widespread dealer network in Europe, Latin

15   America and Russia, where Chrysler is pretty weak at this time,

16   and Chrysler could provide access to its dealer network in

17   NAFTA to Fiat where today we sell only Ferrari, Maserati which

18   are not really high volume cars.

19   Q.   Can you tell me what it is that Fiat brings to the party

20   at New Chrysler?    What is that Fiat is contributing to this new

21   enterprise?

22   A.   Fiat is contributing technology which is worth three

23   billion U.S. dollar, and this technology consists of four

24   different platforms and four different powertrains.

25   Specifically, Fiat is contributing its A, B, C and light
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1    commercial vehicle platforms, a small gasoline engine, 1.4

2    liter, a 3 liter         4-cylinder diesel for light commercial

3    vehicle, a V6 diesel -- sorry -- a 6-cylinder line diesel

4    engine for AV truck and light trucks and a new dual clutch

5    transmission.

6    Q.     And just in case the record isn't clear, could you explain

7    to the Court what you mean when you refer to a platform?

8    A.     Well, I'll try to be very simple.   The platform is

9    everything the customer doesn't see in a car.     It's the

10   underbody and the systems that are behind the scheme of the

11   car.

12   Q.     Now, you referred to a three billion number in terms of

13   this technology.     Can you tell me how that figure was computed?

14   A.     It's the cost incurred by Fiat in developing those

15   technologies.

16   Q.     Is that, in Fiat's view, the market value of that

17   technology?

18   A.     No, absolutely.   The market value is much, much higher

19   than that.

20   Q.     Did Chrysler ever tell Fiat how it valued that technology?

21   A.     Yes.   Chrysler carried out an independent analysis to

22   establish the market value of this technology, and they ended

23   up to a number between eight and ten billion U.S. dollar.

24   Q.     Now, other than these platforms and the powertrains that

25   you've described for the Court, is there anything else that
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1    Fiat is going to bring to new Chrysler?

2    A.   Yes.   Management expertise in developing the introduction

3    in all Chrysler plants of our world-class manufacturing system,

4    which is a pretty brand-new system to manage the plants.   So to

5    reduce to zero all the nonvalue added activities, improve the

6    productivity of the plants measured in numbers of jobs per hour

7    and overall reduce the transformation cost in the plants and

8    improve the quality of life for our blue collars.   This system

9    has been introduced in Fiat in 2004.   It's pretty similar to

10   the one that Toyota is carrying out, and this system has

11   been -- is currently considered probably the most valuable way

12   of handling manufacturing in car plants.

13        Furthermore, Fiat will introduce in Chrysler its product

14   development process.   Today, Fiat has the shortest development

15   time for a platform or for a new powertrain, and we will

16   introduce this methodologies at Chrysler too.

17   Q.   Now, is there any plan for who is going to run new

18   Chrysler?

19   A.   Sergio Marchionne should be the CEO of the New Chrysler.

20   Q.   And does that mean he's going to sit in Torino in Italy or

21   is he going to spend time in Detroit as well?

22   A.   He's going to spend a substantial amount of his time here

23   in Detroit, of course.

24   Q.   Is Fiat bringing anything in terms of distribution assets

25   to new Chrysler?
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1    A.   Fiat will give access to Chrysler to its entire dealer

2    network worldwide.   We will take over Chrysler distribution in

3    Western Europe, in Russia and everywhere else Chrysler has a

4    presence today and integrate their distribution network with

5    ours.   The increased number of dealers should significantly

6    improve the market penetration of Chrysler budget vehicles

7    outside of NAFTA.

8    Q.   And finally, in terms of this line of questioning, is Fiat

9    bringing anything to New Chrysler in terms of procurement?

10   A.   Yes.   This is probably one of the quick wins of the

11   alliance.   We will integrate Chrysler purchasing organization

12   inside the Fiat group purchasing organization.   Today, we are

13   running at Fiat at the purchasing activities with one legal

14   entity that is basically running, purchasing for the entire

15   Fiat group, meaning cars, trucks, agricultural machines and

16   construction equipment.   This will give Chrysler access to a

17   much wider volume base which should dramatically help reduce in

18   procurement costs at Chrysler.

19   Q.   Now, Mr. Altavilla, given the current sorry state of Old

20   Chrysler, whose factories are all shut down and have been now

21   for a month, what is it that makes Fiat believe that it has any

22   hope of turning around New Chrysler?

23   A.   Turning Chrysler around is not going to be very different

24   from what it took to turn Fiat around back in 2004.   Fiat, in

25   2004, was in a situation not very different from what Chrysler
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1    is today.    We implemented this turnaround in three years by

2    using exactly the same methodologies that I described before

3    will be applied to Chrysler by using the same management that

4    in great part will be involved in the relationship with

5    Chrysler, not necessarily as a Chrysler employee, but as part

6    of the integration team that will help implementing this

7    turnaround.   We succeeded in turning a company that was losing

8    two million U.S. dollar per day, weekend and holiday included,

9    in a company that last year made more five million per day.     We

10   strongly trust that the same accomplishment can be done at

11   Chrysler.    Chrysler has got interesting products, a good dealer

12   network and good people that deserve the possibility to play in

13   this turnaround.

14   Q.   What equity stake will Fiat SpA have in New Chrysler?

15   A.   In exchange of the three billion U.S. dollar worth of

16   technology, Fiat will receive an initial stake of twenty

17   percent, then we got the option to increase the stake up to

18   thirty-five percent, in three steps of five percent each,

19   linked to the achievement of three specific technical

20   milestones, and then we will have an option that will last for

21   seven years to grow up to fifty-one percent, even though we

22   will not be allowed to take majority control of Chrysler until

23   the last dime of U.S. taxpayers' money have been fully repaid.

24   Q.   And that includes both the DIP financing and the permanent

25   financing?
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1    A.   Yes, correct.

2    Q.   What will be the value, as of the closing of the master

3    transaction agreement, of your twenty percent stake?

4    A.   Zero, because Chrysler today is carrying a negative equity

5    value.

6    Q.   Well, why are you doing such a transaction?    Why are you

7    taking a twenty percent stake in a company when your stake is

8    worth zero at closing?

9    A.   Because this is a strategic deal for Fiat.    We are here as

10   long-term investor.    We don't look after the equity value in

11   2009, we don't look after the equity value at the end of 2010,

12   which is going to be negative right away; we are here for the

13   long run.   That's why we have an option to buy the fifty-one

14   percent of Chrysler that is going to last seven years, so.

15   Q.   Will any existing shareholder of Old Chrysler, by which I

16   mean Daimler or Cerberus, have an equity stake in New Chrysler?

17   A.   No, they won't.

18   Q.   Does Fiat intend to nominate any current officer or any

19   member of the board of managers of Chrysler to the board of

20   managers of New Chrysler?

21   A.   No.

22   Q.   Does Fiat have an intention able the three people it will

23   nominate to the new Chrysler board of managers?

24   A.   As we speak, our intention is to nominate Mr. Sergio

25   Marchionne, myself and Mr. Lou Noto.
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1    Q.   How will New Chrysler fund the obligations it will have as

2    of the closing under all of the contracts specified under the

3    master transaction agreement as being assumed by New Chrysler?

4    Where is that money coming from?

5    A.   That money is supposed to flow from the U.S. Treasury.

6    Q.   And do you have an understanding with the U.S. Treasury

7    that that permanent financing will be in place by the time of

8    the closing?

9    A.   We developed that understanding in good faith throughout

10   the negotiations.

11   Q.   Is it important, Mr. Altavilla, that -- to Fiat that New

12   Chrysler acquire the assets that it's taking from Old Chrysler,

13   under the master transaction agreement, free and clear of all

14   liens, claims, interests and encumbrances?

15   A.   Yes, absolutely.

16   Q.   And why is that, sir?

17   A.   Because otherwise we'll be -- New Chrysler will be exposed

18   to liabilities that have never been contemplated as part of the

19   business case and that then can be affecting the business case

20   in a way that make the overall transaction not appealing any

21   longer to Fiat.

22   Q.   If New Chrysler was required to assume all of the existing

23   liabilities of Old Chrysler, would Fiat consummate this

24   transaction?

25   A.   No.
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1    Q.   Why not?

2    A.   Because this is not the empowerment that we got from our

3    shareholder to consummate a transaction that will carry a

4    negative equity value going forward.

5                MR. HOLLEY:   Your Honor, I have no further questions

6    at this time.

7                THE COURT:    All right.   Cross—examination?

8                MR. ZAKIA:    Yes, Your Honor.   Your Honor, Jason Zakia

9    of White & Case for the Indiana pensioners.


11   BY MR. ZAKIA:

12   Q.   Mr. Altavilla, good afternoon.

13   A.   Good afternoon.

14   Q.   Or good evening.      Nice to see you again.

15        I have a few questions.     First, I'd like to just be clear

16   about the terms of the transaction.       First of all, it is true

17   that Fiat is contributing no cash to either -- to New Chrysler,

18   correct?

19   A.   Yes, it's true, we're not contributing any cash.

20   Q.   Okay.    And Fiat is contributing nothing at all to Old

21   Chrysler?

22   A.   It's true, correct.

23   Q.   Fiat is contributing the technology that you testified

24   about into New Chrysler?

25   Q.   Okay.    And in exchange is receiving a twenty percent
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1    equity stake in the company with the rights to acquire more?

2    A.   Yes.

3    Q.   Now it's true, sir, that Fiat has made no effort to

4    value -- to determine the fair market value of the technology

5    that it is conveying to New Chrysler, correct?

6    A.   That's correct.

7    Q.   Okay.   And the ten billion -- eight to ten billion dollar

8    number you testified about a few moments ago is a number that

9    was derived independently of Fiat and you have no knowledge

10   whatsoever as to how that number was arrived at?

11   A.   That's correct.

12   Q.   And as you sit here today, you cannot tell the Court or

13   any of us whether that number is accurate, inaccurate, too

14   high, too low; you don't know anything about the validity of

15   that number?

16   A.   No, I don't.

17   Q.   The number that Fiat has always used in characterizing the

18   value of its contribution was the three billion dollar number

19   that represented its historical cost?

20   A.   Yes, that was the number, and then we asked JDPower to

21   carry out an analysis of what would have been that cost -- not

22   the market value, but the cost if that technology was due to be

23   developed today, and they came up with a valuation of four

24   billion U.S. dollar.

25   Q.   And again, as you said, the four billion dollar estimate
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1    was an estimate of the cost to produce the technology, not the

2    value of any licenses that may be conveyed to New Chrysler?

3    A.     Correct.

4    Q.     Okay.   And just to be clear, when we talk about

5    transferring or contributing the technology, what's happening

6    is that Fiat will grant New Chrysler a nonexclusive license to

7    use this technology?

8    A.     A permanent, nonexclusive license to use this technology,

9    yes.

10   Q.     Okay.   And that means that Fiat will retain the right to

11   use the same technology in its markets?

12   A.     Of course, yes.

13   Q.     Okay.   And Fiat would have the right to license that

14   technology to other manufacturers?

15   A.     Yes, correct.

16   Q.     Now, in terms of -- you talked a little bit about where

17   Fiat was strong and Chrysler was weak.     I'd like to speak, for

18   a moment, about -- there are some areas where Chrysler is

19   strong and Fiat is weak, right?

20   A.     That's correct.

21   Q.     Okay.   And that would -- one example would be in the SUV

22   market?

23   A.     Yes, true.

24   Q.     And Fiat would plan, after the consummation of this

25   transaction, to take Chrysler technology and move that to other
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1    markets?

2    A.   Yes.    So far we have identified two projects that can be

3    implemented pretty quickly.    The first one is the Dakota pickup

4    truck that Chrysler was planning to phase out in the United

5    States, and the tooling of the Dakota pickup truck will be

6    moved to Latin America and installed in one of our facilities

7    there.

8    Q.   And by -- I'm sorry -- by our facilities you mean Fiat's?

9    A.   Fiat facilities, yes.    And the other one is the Dodge

10   Journey which will be manufactured also in Latin America and

11   then exported to other countries.

12   Q.   Okay.   So those are examples of benefits that flow to Fiat

13   from the Chrysler technology that exists today?

14   A.   Yes, correct.

15   Q.   Now, we talked a little bit about the technology that was

16   being contributed; there were some other portions of the deal.

17   First of all, Fiat, you testified, would be receiving a twenty

18   percent equity value in New Chrysler?

19   A.   Yes.

20   Q.   Okay.   And I think you testified something about it having

21   no value, that equity?    Is that what you said?

22   A.   As we speak, that equity stake has no value because the

23   company is carrying a negative equity value.

24   Q.   Wait, but that's not the real number, right?   That's not

25   the value that Fiat places on that equity stake does it?
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1    A.   That's why I said that we are here for the long run.

2    We're a strategic investor and we look forward the equity value

3    in ten, fifteen, twenty years from now.

4    Q.   So the value to Fiat of that equity stake is much, much

5    higher than zero?

6    A.   It's a -- it has a strategic value.

7    Q.   Yes.    And Fiat has not made any effort to determine what

8    the fair market value of that equity is, right?

9    A.   No.

10   Q.   They have not done that?

11   A.   No.

12   Q.   As you sit here today, you don't know?

13   A.   No.    No, no, no.   We didn't do that analysis because, as I

14   said, we're not interested in determining that value today.

15   Q.   Okay.   So you did not do that analysis?

16   A.   No.

17   Q.   And as a result, you don't know what the value of that

18   equity is?

19   A.   Correct.

20   Q.   Now, I'd like to talk also about another aspect of the

21   transaction.    Chrysler -- Old Chrysler is contributing

22   substantially all of its assets to New Chrysler as part of this

23   transaction, right?

24   A.   Yes, correct.

25   Q.   And as I think you testified about, there are some assets
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1    of value to Fiat that are being conveyed as part of that

2    transaction?

3    A.   Yes.

4    Q.   Okay.   Clearly, both sides are bringing synergies to the

5    deal, from your point of view?

6    A.   That's correct.

7    Q.   Including Old Chrysler?    Sorry, including the assets being

8    conveyed out of Old Chrysler?

9    A.   Yes.

10   Q.   Okay.   Now, Fiat has not made any effort to determine the

11   value of the specific assets being conveyed out of Old Chrysler

12   into New Chrysler under the terms of this agreement, right?

13   A.   No, because we were not interested in assessing the value

14   of single assets.

15   Q.   Okay.   So, single assets or the collection of those

16   specific assets being conveyed out of the bankruptcy estate to

17   New Chrysler, you don't have any idea what those are worth as

18   you sit here today?

19   A.   No.    No, we don't.

20   Q.   Now, I'd like to talk a little bit about the negotiations

21   and how this deal was arrived at.

22        I think you testified, on direct examination, about the

23   negotiations that you entered into with Chrysler concerning

24   this alliance.    Chrysler wasn't the only party that you

25   negotiated with concerning this alliance, right?
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1    A.   If you're referring to the negotiations of the first term

2    sheet, it's correct.   Also Cerberus was part of the discussion

3    because they were one of the parties of the transaction.

4    Q.   And by the first term sheet you mean the term sheet

5    entered into between Fiat and Chrysler in January of 2009?

6    A.   That's correct.

7    Q.   Okay.   And that's not the term sheet that ultimately led

8    to the transaction that the Court is being asked to approve

9    today, right?

10   A.   That's correct.

11   Q.   Okay.   The Court is being asked to approve a deal that

12   resulted from a later term sheet that was entered into between

13   Fiat, Chrysler and the United States Treasury?

14   A.   And Cerberus.

15   Q.   Correct?

16   A.   And Cerberus.

17   Q.   And Cerberus, right?

18   A.   Yes.

19   Q.   Okay.   And in connection with that transaction, which

20   began after the execution of the January 22nd term sheet, Fiat

21   and you, personally, had extensive negotiations with the United

22   States government, right?

23   A.   Yes, we did.

24   Q.   And I think, in fact, you told me yesterday that you felt

25   like you were on call for the U.S. Treasury for four months.
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1    Is that right?

2    A.   That's right.   To me it was.

3    Q.   Okay.   And in connection with being on call for U.S.

4    Treasury in the course of negotiating that transaction, you

5    spoke on the telephone to Mr. Bloom and other members of the

6    president's auto task force and other U.S. government

7    officials, I think your estimate was possibly hundreds of times

8    over that period, right?

9    A.   Yes, of course.

10   Q.   Okay.   And you also had -- I believe, again, you told me

11   at least thirty in person meetings in Washington over that

12   three-month period with members of the president's task force

13   or members of the U.S. Treasury, right?

14   A.   Yes, that's correct.

15   Q.   And the purpose of all these hundreds of phone calls and

16   thirty or so meetings was to negotiate the terms of a potential

17   alliance with Chrysler?

18   A.   Yes, that's correct.

19   Q.   It's also true, sir, that in the case of at least sixty

20   percent of the phone calls and fifty percent of the meetings,

21   Chrysler did not participate in all -- in those discussions?

22   A.   Yes, that's correct.   But Chrysler has always been fully

23   and duly informed of our negotiations with the U.S. Treasury.

24   Q.   Understood.   My question was a little different, and I

25   just wanted to make sure that I correctly understood the
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1    percent of time in which your discussions with the U.S.

2    government were just bilateral between Fiat and the U.S.

3    government and which also involved Chrysler, and I believe you

4    told me yesterday, at your deposition, that in the case of the

5    phone calls, it was probably around sixty percent of the time

6    it was just you and the government?

7    A.   That's correct.

8    Q.   Okay.   And probably about fifty percent of the time the

9    meetings were just you and the government?

10   A.   Yes, that's correct.

11   Q.   You're familiar, sir, with Chrysler's viability plan that

12   it submitted to the U.S. Treasury in February of 2009?

13   A.   I've read it.

14   Q.   And you read it, but you were also familiar with the fact

15   that it occurred at the time in which it occurred, right?     I

16   mean, you knew about it in February?

17   A.   Yes, I knew about it.

18   Q.   And you were aware that as part of that viability plan

19   Chrysler determined -- Chrysler's management determined that a

20   stand-alone management -- stand-alone turnaround plan would be

21   in the best interest of Chrysler?

22   A.   Yes.

23   Q.   And that was the scenario that they put forth as their

24   preferred option in the viability plan, right?

25   A.   Yes.
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1    Q.   Am I correct that Fiat disagreed with Chrysler's

2    assessment with regard to the stand-alone viability plan being

3    preferable to an alliance with Fiat?

4    A.   I'm not sure that this is the right way to characterize

5    the issue.

6    Q.   Well --

7    A.   Chrysler had a viability plan plus an assumption to

8    consider the incremental cash flow coming out of the synergies

9    that could be realized in an alliance with Fiat.    We were

10   looking to a much broader deal which was not just encompassing

11   those synergies but a much more greater integration between the

12   two companies.

13   Q.   Let me ask my question a different way.    Chrysler told the

14   president's auto task force that it believed the best option,

15   at least in the short and medium run, was a stand-alone

16   restructuring, right?

17   A.   I was not part of the presentation, so I cannot answer

18   that.

19   Q.   No, I know, but you were aware of what Chrysler's position

20   was, weren't you?

21   A.   I was aware that they were going to submit a viability

22   plan, and I was aware only of the incremental cash flow that

23   could have been generated by our synergies.    I was not part

24   neither of the drafting of the viability plan nor I've seen the

25   viability plan before was submitted.
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1    Q.   No, but after it was submitted, you knew that Chrysler's

2    preferred case was a stand-alone restructuring, right?

3    A.   I guess that the position that the Chrysler management

4    expressed was that the stand-alone plan coupled with the

5    synergies with an alliance partner, not specifically Fiat, was

6    in the best interest of Chrysler.    That's my recollection of

7    facts.

8    Q.   Let me ask you this question.   After the February 17th

9    submission of Chrysler's viability plan, did you get a call

10   from Mr. Bloom of the president's auto task force?

11   A.   Yes.

12   Q.   Okay.   And was the purpose of Mr. Bloom's call to arrange

13   a meeting between Fiat and his staff concerning a possible

14   strategic alliance with Chrysler?

15   A.   Yes.    Mr. Bloom and the auto task force wanted to dive a

16   bit into the rationale of the alliance that was discussed with

17   Chrysler.

18   Q.   Okay.   And this request for a meeting came, I believe you

19   told me, one or two days after the viability plan was

20   submitted, right?

21   A.   That's correct.

22   Q.   And the meeting that was requested was just between Fiat

23   and the U.S. Treasury; Chrysler wasn't invited?

24   A.   Chrysler wasn't invited, but we informed Chrysler that we

25   were going to have this meeting.
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1    Q.   But they did not attend the meeting?

2    A.   No, they didn't.

3    Q.   And you expressed to Mr. Bloom, and other members of the

4    auto task force, during this period, your belief that an

5    alliance with Fiat was preferable for Chrysler than a stand-

6    alone restructuring, right?

7    A.   No.   We showed the auto task force our business plan

8    without making any comment about the viability or non of the

9    Chrysler plan.

10   Q.   Fiat did not have a position at this time as to whether an

11   alliance with Fiat was preferable to a stand-alone

12   restructuring of Chrysler?

13   A.   Our view is that an alliance with Fiat is certainly

14   preferable and in the interest of Chrysler than a stand-alone

15   plan.

16   Q.   And that was your view in February of 2009, right?

17   A.   It was our view also at that time.

18   Q.   And you shared that view with the United States Treasury?

19   A.   Yes, we did.

20   Q.   Now, one of the issues that was discussed at the March

21   2009 meeting with Mr. Bloom was the level of equity that Fiat

22   would have in the restructured company.     Is that correct?

23   A.   That's correct.

24   Q.   Okay.   Originally Fiat had proposed thirty-five percent?

25   A.   Fiat had agreed with the shareholder of Chrysler to get
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1    thirty-five percent as an initial stake in the company and to

2    move up to fifty-five percent paying a nominal value ranging

3    from twenty-five up to two hundred million U.S. dollar.

4    Q.   Okay.    But Mr. Bloom told you that he wanted that thirty-

5    five percent number to go down, right?

6    A.   Mr. Bloom told us that in the spirit of all stakeholders

7    making concessions, Fiat should have considered as well.

8    Q.   And Fiat agreed to do that, right?

9    A.   And Fiat agreed to do that, notwithstanding that the three

10   billion U.S. dollar value as remains -- remained the same.

11   Q.   And the ultimate -- well, twenty percent is the equity

12   value in New Chrysler that Fiat's going to receive under the

13   current transaction, right?

14   A.   Right.

15            MR. BIENENSTOCK: Objection, Your Honor.

16            THE COURT:     THE COURT:   And what's your objection?

17            MR. BIENENSTOCK:     My objection is as follows:     It's

18   relevant to materiality.   The transaction in front of this

19   Court for a decision is the transaction under which Chrysler,

20   the debtor in this Chapter 11 case, its estate, is transferring

21   assets for an acquisition vehicle.     That's either a fair

22   transaction that can be approved under Section 363 or it's not.

23            The transaction that is not before this Court for

24   approval is how the shareholders of the acquisition vehicle

25   decided to allocate those shares and run the company that they
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1    are hoping to buy.       And all day long we've had questions about

2    the latter.    About how the three shareholders negotiated and

3    how the new company will run, and that's not in front of this

4    Court.

5                And when the witness says negotiated with Chrysler, I

6    think the witness -- it's not that the witness is confused, but

7    he really means he was negotiating for Fiat's position in New

8    Chrysler.    He's not doing a deal with Old Chrysler.      He's

9    admitted they're not paying a penny to Old Chrysler.        He's

10   doing a deal with New Chrysler.        And the deal of New Chrysler

11   is not in front of this Court.       And I am concerned about three

12   things.

13               First, the line of questioning is not material or

14   relevant.    Second, it's a major source of confusion, and it's

15   confusing the legal issues and the arguments and it's unfair to

16   all of the parties-in-interest.        I hesitated, Your Honor, to

17   make this objection now because I realize that Fiat came

18   forward and put on the witness and therefore the objectors

19   should be able to cross—examine, but to go into depth on how

20   the acquisition vehicle shareholders negotiated amongst

21   themselves when that's not the transaction that anyone's asking

22   this Court to approve or disapprove is just wrong.        It's out of

23   bounds.   And at least as one party-in-interest, Chrysler

24   Financial objects.

25               THE COURT:    THE COURT:    No, Mr. Lauria, you have
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1    counsel who is handling this witness; he will address the

2    Court.

3             MR. LAURIA:    All right.    If I may just comment, Your

4    Honor, that the objection was really legal argument.      Our

5    theory of the case is --

6             THE COURT:    It's up to counsel handling the witness.

7             UNIDENTIFIED SPEAKER:    What's the objection, then, I

8    guess?

9             MR. BIENENSTOCK:    Materiality and relevance.

10            MR. ZAKIA:    Your Honor, I'm frankly very surprised

11   that counsel would suggest that the master transaction

12   agreement is somehow irrelevant to this Court's consideration.

13   As all of the testimony in this case has established, I believe

14   that the transactions are linked --

15            THE COURT:    Don't turn away from the microphone.      And

16   address me, please.

17            MR. ZAKIA:    I apologize, Your Honor.   That the

18   transactions are related; they were negotiated together.        The

19   thought that there would be a transaction from New Chrysler to

20   Old Chrysler without also the capitalization of Old Chrysler,

21   some of which includes creditors of New Chrysler -- of Old

22   Chrysler, and some of which is -- some of which the equity is

23   on account of claims against Old Chrysler --

24            THE COURT:    That's an argument.

25            MR. ZAKIA:    -- clearly I believe it's relevant.
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1                THE COURT:    That's a legal argument.   But what is the

2    relevance of the value of New Chrysler?

3                MR. ZAKIA:    Well, Your Honor, the value of New

4    Chrysler is certainly related and relevant to the issue of the

5    value of the assets of Old Chrysler which are being contributed

6    to the new entity.       The fact that the two values may not be

7    identical does not mean that they're not relevant to that

8    inquiry.    The majority of the assets of new Chrysler are the

9    assets of old Chrysler, which is the subject of this sale.

10               THE COURT:    But the value obtained from the joint

11   venture, or the alliance, is going to be the synergies between

12   the two and how they work together.       I mean, it's not going to

13   be the composite value of Old Chrysler's assets and the

14   technology contributed by Fiat.       You just can't add the two

15   numbers and say that's the value.       Or by the same token you

16   couldn't take the total value and divide by some percentage and

17   say this must have been the value of the assets of Old

18   Chrysler.

19               MR. ZAKIA:    Well, I would suggest, Your Honor,

20   that -- two points.      One, first of all, as counsel correctly

21   pointed out, we didn't call the witness, the witness was called

22   by Fiat, and all of the questions being asked on cross—

23   examination are directly related to the witness' direct

24   examination.

25               First of all, I think -- I'll respond to Your Honor's
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1    question, but I think that would actually resolve the

2    objection.   The second issue is the fact that it may not be a

3    mathematical connection such that you can look at the value of

4    New Chrysler and divide it in half and determine that that's

5    the value of Old Chrysler is not the standard we would submit

6    for relevance.   Clearly, there is a relation since some of

7    those synergies, as the witness has already testified, are

8    derived from the value associated with the assets of Old

9    Chrysler which are being contributed to New Chrysler under the

10   terms of this agreement.

11             Moreover, Your Honor, the similarity between the

12   parties, there were certain -- there are certain entities that

13   will be shareholders of new Chrysler that also were

14   stakeholders in Old Chrysler, and since this transaction which

15   began as an out-of-court restructuring of Old Chrysler and is

16   now being put forth before this Court as a 363 sale are so

17   intertwined, we think it's clearly relevant to the present

18   motion.

19             THE COURT:   Well, I'll overrule the objection, but

20   the overruling of the objection is really premised upon that

21   this witness is being offered by Fiat and not a ruling

22   necessarily on the objection itself.   Had it been raised

23   earlier, I'm not sure the result would have been the same.      But

24   your cross is limited to what was presented on direct by the

25   Fiat witness.
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1                MR. ZAKIA:   Thank you, Your Honor, and I'll --

2                THE COURT:   Right.

3                MR. ZAKIA:   -- endeavor to continue along those

4    lines.

5    BY MR. ZAKIA:

6    Q.   Mr. Altavilla, back to the negotiations -- the discussions

7    that you had with Mr. Bloom.      The twenty percent equity stake

8    in New Chrysler, which Fiat is acquiring, was agreed to at a

9    meeting in Washington between Fiat and Mr. Bloom.      Is that

10   correct?

11   A.   That's correct.

12   Q.   Now, one of the other shareholders in New Chrysler is

13   going to be the UAW's VEBA trust. Is that right?

14   A.   Correct.

15   Q.   And under the terms of the transaction, as currently

16   structured, the VEBA trust will be receiving fifty-five percent

17   of the equity in New Chrysler?

18   A.   Yes.

19               MR. BROMLEY:    Objection, Your Honor.

20               THE COURT:   What's your objection?

21               MR. BROMLEY:    James Bromley of Cleary Gottlieb on

22   behalf of UAW.    With respect, Your Honor --

23               THE COURT:   All right, talk into the microphone,

24   please.

25               MR. BROMLEY:    With respect to Your Honor's recent
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1    statements on this, this is outside of the scope of the direct

2    testimony.

3                THE COURT:   What's the nexus between your question

4    and the direct examination?

5                MR. ZAKIA:   Your Honor, the witness testified as to

6    Fiat's ability to make concessions and to adjust its equity

7    stake in its negotiations.

8                THE COURT:   Wait, wasn't that in response to your

9    question?

10               MR. ZAKIA:   No, Your Honor, I believe on direct

11   examination the --

12               THE COURT:   I don't think so.   I think it was in

13   response to your question.

14               MR. ZAKIA:   But Your Honor, the witness clearly

15   testified as to the negotiations -- the arm's-length

16   negotiations that counsel specifically asked about that led to

17   this transaction.    There were more than just two parties to

18   those negotiations.      And if the Court is going to consider the

19   good-faith nature of the negotiations, I think we are entitled

20   to cross-examine concerning all of the various parties that

21   participated in them.

22               THE COURT:   Well, I mean, you have a UA -- Mr.

23   Bromley, go ahead.

24               MR. BROMLEY:    Your Honor, respectfully there was not

25   a word mentioned in the direct testimony about the UAW or the
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1    VEBA, and we will have a witness from the UAW available.

2               MR. ZAKIA:   Your Honor, the witness testified on

3    direct examination as to those negotiations.     He personally

4    participated in negotiations that included both the VEBA and

5    the United States government.

6               MR. BROMLEY:    Your Honor, Counsel's now testifying

7    himself.

8               MR. ZAKIA:   Well, that's --

9               MR. BROMLEY:    That's not in the testimony, Your

10   Honor.

11              MR. ZAKIA:   Well, that will be what I will attempt to

12   solicit --

13              THE COURT:   Just a minute, please.   Mr. Bromley, step

14   away.    Look, you're going down a path that I don't think is

15   relevant to the direct examination that took place with respect

16   to this witness.   All right?    So move in another direction.

17              MR. ZAKIA:   Yes, Your Honor.

18        (Pause)

19              MR. ZAKIA:   Sorry, Your Honor, just one moment to

20   make sure I conform my questions to Your Honor's ruling.

21   BY MR. ZAKIA:

22   Q.   Mr. Altavilla, I think you testified on direct examination

23   concerning the importance of the 363 sale process to Fiat.        Do

24   you remember that testimony?

25   A.   Yes, I did.
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1    Q.   Okay.   And the ability to buy these assets free and clear

2    of all liens?

3    A.   That's correct.

4    Q.   Okay.   That was a view that Fiat developed relatively

5    early on in these negotiations, right?

6    A.   I wouldn't say early on.   We developed this view at the

7    end of March by looking at the performance of the company and

8    at the deterioration of the market in the U.S.

9    Q.   At least a month before the bankruptcy filing, it was

10   Fiat's position that it would strongly favor an in-court rather

11   than an out-of-court restructuring, correct?

12   A.   That's correct.

13   Q.   Okay.   And Fiat communicated that preference to the United

14   States government?

15   A.   Yes, we did.

16   Q.   Okay.   I'd like to talk a little bit about the days

17   immediately preceding the Chrysler bankruptcy filing, because

18   we've heard a lot of testimony from various witnesses

19   concerning what precipitated that filing, and I just want to be

20   clear.   It's a true statement, sir, that on the day before

21   Chrysler filed for bankruptcy, so on April 29th, 2009, Fiat

22   informed Mr. Bloom that it would not go forward with the

23   transaction as currently structured absent a bankruptcy filing

24   by Chrysler?    Is that true?

25   A.   We said that it was our strong recommended course of
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1    action, in the absence of a filing, we would have needed to

2    reconsider our position.

3    Q.   And in the absence of a filing, Fiat would not be prepared

4    to go forward with the transaction as currently structured, is

5    that correct?

6    A.   That's correct.

7    Q.   Okay.   And it was communicated to the United States

8    government that that was Fiat's position regardless of any

9    agreement that was or was not reached between Chrysler and its

10   first lien lenders, right?

11   A.   That's correct.

12   Q.   So even if every first lien lender had signed onto an

13   agreement with Chrysler, Fiat's position remained that it would

14   not go forward with a transaction as structured absent a

15   bankruptcy filing?

16   A.   I'm sorry, I said slightly differ.   I said that we would

17   have needed to reconsider whether or not to consummate the

18   transaction, but in all likelihood we would have not.

19   Q.   And you told the government that?

20   A.   Yes.

21   Q.   Okay.   And you told the government, I believe as you told

22   me at your deposition yesterday, that you communicated to the

23   government that if -- without a bankruptcy filing Fiat was

24   going to require substantial additional capital from the U.S.

25   Treasury, right?
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1    A.   That's correct.

2    Q.   And they wouldn't be willing to go forward with the

3    transaction as structured?

4    A.   That's correct.

5    Q.   Now I'd like to talk --

6    A.   I'm sorry.

7    Q.   I'm sorry, sure.

8              THE COURT:     How much more cross do you have?

9              MR. ZAKIA:     Just a few minutes, Your Honor.

10             THE COURT:     All right.

11             THE WITNESS:    Thank you.

12             MR. ZAKIA:     Are you ready, sir?

13             THE WITNESS:    Yeah, sure.

14             MR. ZAKIA:     Okay.

15   Q.   Okay.   I'd like to ask just a few questions about the

16   process that you anticipate needing to complete in the event

17   the Court were to approve the sale motion that is before it

18   today.   There are additional steps that would need to be

19   completed in order to close this transaction, right?

20   A.   That's correct.

21   Q.   Okay.   One step is additional government approvals are

22   necessary?

23   A.   We need to sign the term sheet with the U.S. Treasury and

24   the master transaction agreement.

25   Q.   What other steps are there that would need to be completed
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1    between a court approval and the ability to close that

2    transaction?

3    A.   There are a number of agreements that needs to be entered

4    into.

5    Q.   Okay.   About how many?

6    A.   A pretty good number.     I'm sorry, I don't remember exactly

7    how many, but a pretty good number.

8    Q.   Okay.   And are there any additional approvals from any

9    governmental agencies that would need to be secured?

10   A.   Not to the best of my knowledge.

11   Q.   Do you know how long it would take after the approval was

12   secured from this Court to close that transaction?

13   A.   Our expectation is to close in a few days.

14   Q.   But do you know for certain whether you'd be able to

15   accomplish that expectation?

16   A.   All parties are working in good faith to complete the

17   transaction as soon as possible and immediately after the Court

18   does make a positive determination.

19   Q.   But you can't be sure how long it'll take?

20   A.   Let's put it this way.     We don't have too many open items

21   left to sign the agreement.     All the major open issues have

22   been agreed.   We are ready to go as soon as the Court approves

23   the transaction.

24   Q.   Okay.   I'd like to ask just a couple of questions about

25   the product line that you discussed on your direct examination.
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1    The smaller cars that Fiat intends to contribute the

2    technology, that's a type of car that has not historically been

3    marketed in the United States, is that correct?

4    A.   That's correct.

5    Q.   And that those are the A cars and the B cars, which are

6    the smaller platforms?

7    A.   That's correct.

8    Q.   And they've historically had a market share in Europe, but

9    not here?

10   A.   Correct.

11   Q.   Okay.   And to the best of your knowledge, there is no

12   other manufacturer that has successfully and profitably

13   marketed -- (audio malfunction)

14        -- there is no other manufacturer that's been able to

15   successfully and profitably manufacture the A car or the B car

16   platform in the U.S. market to date, right?

17   A.   Profitably, I would love to know the economics of my

18   competitors, but unfortunately I can't.

19   Q.   Okay.   So you don't know of any that have succeeded yet?

20   A.   I'm talking about the profitability.     In terms of success,

21   if you could define what success means I can probably answer

22   the question.

23   Q.   Well my version of success was selling the car profitably,

24   but that need to be yours.   So you don't know with regard to

25   profitability?
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1    A.   I have no evidence.

2    Q.   Okay.   And with regard to the other manufacturers that

3    have begun selling these platforms, it's only really been over

4    the course of the last six to twelve months, right?

5    A.   Over the last two years probably.

6    Q.   Okay.   And in terms of integrating that technology into

7    Chrysler facilities, there will be a substantial time lag

8    between when the deal closes and when Fiat technology is able

9    to be used in Chrysler facilities, right?

10   A.   We would need eighteen months to start manufacturing one

11   of our platforms in a Chrysler plant, and between eighteen and

12   twenty-four months to start manufacturing our power train in

13   one of the Chrysler facilities.     The timing of the introduction

14   of a power train is longer than the one of a platform because

15   we need to get all necessary approvals from the EPA and the car

16   as related to the emission compliance of the engine.

17   Q.   Okay.   And it could take as long as thirty-six months to

18   complete introducing the Fiat technology into the U.S. market?

19   A.   Thanks God it's much faster.    Twenty-four months should be

20   the longest.

21   Q.   Okay.   Is it Fiat's intention to terminate the -- its --

22   the master transaction agreement if that transaction does not

23   close by June 15th?

24   A.   I'm sorry, could you rephrase your question?

25   Q.   Yeah.   Is it Fiat's intention to terminate the master
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1    transaction agreement if it does not close by June 15th?

2    A.   I guess that it will be extremely difficult to judge the

3    situation of the company at that time and whether or not it's

4    still possible to consummate the transaction.

5    Q.   Okay.    So as you sit here today you're not sure whether or

6    not Fiat would be willing to consummate the transaction even

7    after the June 15th date?

8    A.   We clearly look at the economics of the company and the

9    ability of the company to go forward.    As you know, today all

10   Chrysler plants are not manufacturing any cars and any power

11   train.   So Chrysler today is not generating any revenue.

12   Q.   Okay.

13   A.   And without the DIP budget, of course, Chrysler cannot

14   stay alive.

15   Q.   But Fiat does have a long-term view of this investment,

16   right?

17   A.   That's correct.

18   Q.   Okay.    So it's not just about the next weeks or months;

19   it's about the next ten or twenty years?

20   A.   But let me tell you, in one month Chrysler needs to face

21   payables of 1.5 billion on average.    And without generating any

22   revenue 1.5 billion is a value that's -- it's not value

23   creation, and our shareholders will never support Fiat paying

24   1.5 billion of payables without generating any revenue.     A

25   long-term investment is different from a bearing cost.
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                           CHRYSLER LLC, et al.

1    Q.   And is the lack of revenue over this period as a result of

2    Chrysler's decision to shut down its facilities?

3    A.   Yes, because there is a -- there was a huge inventory

4    sitting in Chrysler dealer network, more than 320,000 cars that

5    needs to be reused, strongly reused, otherwise the problem that

6    basically forced Chrysler into this situation will not be

7    solved and properly addressed.

8    Q.   But it was Chrysler's decision to shut down the

9    facilities?

10   A.   Yes, it was.

11   Q.   Chrysler can make the decision to start them back up

12   again?

13   A.   Yes, Chrysler can make that decision.   I'm not sure that

14   would be a wise decision given the market trend and the number

15   of cars still sitting in the inventory today, 295,000 as we

16   speak.

17   Q.   And that doesn't change your view about whether or not

18   Fiat would terminate this agreement if it doesn't close on June

19   15th?

20   A.   As I said, if this agreement is not closed by June 15th,

21   we would need to reconsider our ability to consummate the

22   transaction.

23            MR. ZAKIA: Thank you.

24            Sorry, one second, Your Honor.

25   Q.   One last question.   The master transaction agreement
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1    provides that Chrysler has the right to extend the closing date

2    till July 15th if it doesn't secure certain regulatory

3    approvals.   Are you aware of that fact?

4    A.   Yes, I do.

5    Q.   Okay.   And do you know if Chrysler has secured those

6    approvals?

7    A.   To the best of my knowledge, Chrysler is actively trying

8    to secure those approvals.

9    Q.   Okay.   And do you know whether or not they will succeed in

10   securing those approvals by June 15th?

11   A.   I have no indication that Chrysler will not succeed.

12   Q.   But you don't know that they will?

13   A.   I don't know that they will.

14              MR. ZAKIA: Thank you.

15              THE COURT:   Any other cross?

16              MS. BROWN: Good evening, Your Honor.   Amy Brown from

17   Squire Sanders on behalf of the Committee of Chrysler Affected

18   Dealers.


20   BY MS. BROWN:

21   Q.   Good evening.

22   A.   Good evening.

23   Q.   You are aware that Chrysler has filed a motion seeking to

24   reject the dealer agreements of twenty-five percent of its

25   dealer body, correct?
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                            CHRYSLER LLC, et al.

1    A.   Yes.

2    Q.   And Fiat played no role in determining which dealer

3    agreements Chrysler should seek to reject, correct?

4    A.   Correct.

5    Q.   And Fiat did not determine the number of contracts that

6    Chrysler should seek to reject, correct?

7    A.   That's correct.

8    Q.   And Fiat did not participate in the decision-making

9    process with respect to each of the 789 dealers that Chrysler

10   is seeking to reject, correct?

11   A.   That's correct.

12   Q.   And it's fair to say that Chrysler is not seeking

13   rejection of the 789 dealers at Fiat's insistence, right?

14   A.   That's correct.

15   Q.   And is Fiat aware of the financial condition of any of the

16   dealers that Chrysler is seeking to reject?

17   A.   No, Fiat is not aware of the specific financial

18   profitability of the each individual dealer.

19   Q.   And that would also be true of the dealers that Chrysler

20   is asking that their dealer agreements be assumed, correct?

21   A.   That's correct.

22   Q.   So Fiat is not aware that seventy-two percent of the

23   dealer network that Chrysler is seeking to reject are in

24   healthy financial condition, correct?

25   A.   I'm not aware of this number.
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1    Q.   You testified on direct about permanent financing from the

2    U.S. Treasury.    What is the amount of permanent financing from

3    the U.S. Treasury?

4    A.   The amount of the permanent financing is being determined

5    as we speak, because it would be the end result of the overall

6    amount minus the DIP budget that, of course, changes every day,

7    and will be finally assessed before the closing of the

8    transaction, minus the two billion that will be given to the

9    first lien lenders.

10   Q.   And what are the terms of repayment for this permanent

11   financing?

12   A.   There are two different terms.   The first term is thirty

13   months, and the second term is seven and eight years; one

14   tranche in seven years and the remaining in eight years.

15   Q.   And is there interest on the payments?

16   A.   Of course there is.

17   Q.   Any other fees?

18   A.   Yes.    There is the standard fees that the U.S. Treasury

19   has been applying to the funding to automakers.

20   Q.   But New Chrysler will be required to pay this permanent

21   financing in full with interest and fees, correct?

22   A.   That's correct.

23   Q.   What is the consideration that the U.S. Treasury received

24   for its equity interest in New Chrysler?

25   A.   Eight percent.
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                            CHRYSLER LLC, et al.

1    Q.   And what was the consideration given by the U.S. Treasury

2    for this eight percent interest?

3    A.   I'm sorry, can you rephrase the question?

4    Q.   What consideration did the U.S. Treasury provide for its

5    eight percent equity interest?

6    A.   Well, it's actually coming out of the funding that the

7    U.S. Treasury is providing.

8    Q.   And what funding are you referring to?

9    A.   They have forgiven us of the four billion that were

10   initially contributed.

11   Q.   And that would be the four billion that was contributed to

12   Chrysler in January of 2009?

13   A.   That's correct.

14   Q.   And what is the consideration that VEBA has provided for

15   its equity interest?

16            MR. HOLLEY:     Objection, Your Honor.   Outside the

17   scope of direct.

18            MS. BROWN:    Your Honor --

19            THE COURT:    Again it's outside the scope.   I mean,

20   the ruling from the prior examiner is the same with respect to

21   the direction you're going in.

22            MS. BROWN:    But, Your Honor, on the direct the

23   witness testified about the terms of the transaction, and

24   that's all we're asking about.    In addition, the debtors are

25   seeking a determination that this was a good-faith purchase,
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1    and therefore all of the negotiations would be relevant with

2    all of the parties.     But this really is just trying to

3    understand the terms of the transaction.

4              THE COURT:     Well, I think this goes beyond that.     I

5    gave the answer earlier about the scope of questioning, and the

6    ruling stands.

7              MR. KURTZ:     Your Honor, I just note that we cross-

8    designated everybody else's witnesses, and so we'd like to

9    ensure this witness is available for us to call in our case-in-

10   chief tomorrow so we can go through our own direct without

11   being limited in scope.

12             MR. HOLLEY:     Your Honor, Mr. Altavilla is -- needs to

13   return to Detroit to deal with urgent matters at Chrysler.

14   He's here now, and I don't think it's appropriate to ask that

15   he stay here overnight.

16             MR. KURTZ:     Your Honor, we're prepared to take him

17   out of order and put him on in -- with respect to our defense

18   as soon as the debtors' examination is complete, or Fiat's

19   examination.

20             UNIDENTIFIED SPEAKER:     I'm sorry, I don't mean to

21   interrupt, but just --

22             MR. HOLLEY:     Your Honor, as I recall there was one

23   line of questioning which seemed pretty far afield to begin

24   with which Your Honor ruled was outside the scope of the

25   direct.   So the requested relief seems extreme in light of what
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                            CHRYSLER LLC, et al.

1    it is that they were not allowed to ask Mr. Altavilla.

2             MR. KURTZ:    I don't understand how it's extreme.

3    We're told we can't ask a question that we think is relevant to

4    our objection on the basis it's outside the scope.   So we ask

5    that the witness be made available for our own examination

6    where we can define the scope.   Typically counsel will permit

7    some latitude to not have to have the witness called back.     In

8    this instance they seem to want to stand on their objection, so

9    we ask that the witness be made available.

10            MS. BROWN:    Your Honor, I would also note that we

11   asked for this specific topic in discovery, and Mr. Altavilla

12   was provided to address this topic; no objections were made.

13            MR. HOLLEY:    And on that subject, Your Honor, a

14   deposition was taken of Mr. Altavilla yesterday for almost five

15   hours where both the dealers and the first lien creditors had a

16   chance to ask him any questions.   If they want to seek to

17   designate portions of that transcript I would talk to them

18   about that, but keeping him here seems entirely unfair and

19   inappropriate.

20            MR. KURTZ:    I think, Your Honor, in fact probably

21   more time has been spent on the objection than it would take to

22   go through the testimony, so I think counsel is creating his

23   own issue about the witness.   Nonetheless, having submitted

24   support in this important motion, I don't see how the witness

25   has to run off before everybody else, and I think we're
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1    entitled to ask the questions we're entitled to request.

2             UNIDENTIFIED SPEAKER:    And even on direct, Your

3    Honor, we would reinstate the objection on relevance grounds

4    that Mr. Bienenstock put in.

5             THE COURT:    What -- as far as the witness, I mean the

6    witness can -- unfortunately it may be an inconvenience, but

7    made available tomorrow.   I'm not clear a hundred percent on

8    this issue.   So I'm going to restrict the questioning on cross

9    as I did earlier.   Whether that restriction would play out in

10   any direct I'm not sure.   I'll have to think about the

11   arguments again in terms of relevance and the need for this

12   information in terms of the issues that I need to decide.    But

13   right now I don't think I'm in a position to give a clear

14   answer to that.

15            UNIDENTIFIED SPEAKER:    Thank you, Judge.

16            MS. BROWN:    Thank you, Your Honor.   In light of Your

17   Honor's, ruling I don't have any further questions.

18            THE COURT: All right, thank you.

19            Anyone else?

20            MR. ORR: Yes, Your Honor.


22   BY MR. ORR:

23   Q.   Good afternoon, Mr. Altavilla.

24   A.   Good afternoon.

25   Q.   Kevyn Orr of Jones Day on behalf of the Debtors.     Just a
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                              CHRYSLER LLC, et al.

1    few brief questions.     Now, Mr. Altavilla, you just testified

2    that you didn't participate in the dealer selection process

3    either individually.     Was Fiat made aware of the methodology

4    used by the debtor to select dealers?

5    A.   Yes, we did.

6    Q.   And did you agree with that methodology?

7    A.   We agreed with the methodology.

8    Q.   Thank you.

9                THE COURT: All right, anyone else?

10               MR. ORR: Just --

11               THE COURT: Oh, I'm sorry.

12               MR. ORR: -- two or three more questions, Your Honor,

13   if you don't mind.

14               THE COURT:   Oh, go ahead.

15   Q.   Mr. Altavilla, you're aware that a timesheet was signed

16   this morning -- term sheet, excuse me -- worried about -- the

17   clock is ticking.    That a term sheet of NewCo Car Acquisition

18   LLC was filed this morning with an approximately 7.5 million --

19   a 7.5 billion first lien?

20   A.   Yes.

21   Q.   Are you aware that was executed?

22   A.   No, I didn't.

23   Q.   Okay. Are you aware that this process that you're going

24   through, acquisition, is going to be provided financing from

25   the government of Canada as well?
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                             CHRYSLER LLC, et al.

1    A.   Yes.

2    Q.   Will these financing facilities, even the one that was not

3    signed that you were not aware of, will they provide adequate

4    capital to NewCo to go forward and to operate?

5    A.   We believe they will.

6                MR. ORR: Thank you.

7                THE COURT: All right, Mr. Mayer?

8                MR. MAYER: My partner Jeff Trachtman has no more than

9    two minutes' worth of questioning.



12   Q.   Good evening, Mr. Altavilla.

13   A.   Good evening.

14   Q.   Jeffrey Trachtman, from Kramer Levin, for the official

15   committee of unsecured creditors.    Mr. Altavilla, New Chrysler

16   is assuming thousands of dealer agreements and supplier

17   agreements, isn't that correct?

18   A.   That's correct.

19   Q.   And both types of agreements require frequent

20   communications between the dealers and the suppliers on the one

21   hand, and senior and middle-level management at the company on

22   the other hand?

23   A.   At the company, you mean at Chrysler?

24   Q.   At Chrysler.

25   A.   I believe so.
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                              CHRYSLER LLC, et al.

1    Q.   In fact, dealers and suppliers talk on a regular basis --

2    A.   They should.

3    Q.   -- with Chrysler?

4    A.   It's a good common practice.

5    Q.   In fact, daily, even several times a day?   Who will be in

6    those roles at New Chrysler after the closing?

7    A.   We have not made that determination yet.

8    Q.   You recognize, though, that the relationships that exist

9    are important for the continuity of the company?

10   A.   We absolutely value that relationship.

11   Q.   And without committing New Chrysler to keeping on any

12   particular individual, isn't it true that, at least initially,

13   dealers and suppliers will be dealing with the same people that

14   they've been dealing with?

15   A.   Certainly we will value very much all the existing

16   relationships, but we would value much more managerial skills

17   and leadership of the people that are currently in those

18   positions.   And if they have that -- those characteristics,

19   there is no reason for fear to remove them from their job.

20   Q.   And isn't it true that you expect to continue to staff

21   these positions primarily with Americans?

22   A.   That's absolutely correct.    We don't intend to ship

23   hundreds of Italians.    There would be a loss to the Wal-Mart.

24   Q.   I'm glad I gave you the opportunity to use the same joke

25   you used in the deposition.
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                            CHRYSLER LLC, et al.

1    A.   It's the best way to describe the way in which Fiat

2    handles its international operations.

3    Q.   I appreciate that.

4    A.   We use Chinese in China and Indians in India.

5    Q.   I assume it wouldn't just be any Americans but Americans

6    who have experience working for OEMs and dealing with these

7    types of issues and relationships?

8    A.   Yes, that's correct.

9    Q.   And I believe you also testified that -- I mean, in your

10   deposition, that the American dealers are going to be given the

11   opportunity to carry Fiat products as part of their product

12   line?

13   A.   That's correct.

14   Q.   But it's the case that they won't be required to?

15   A.   Of course they won't be forced to introduce a new brand,

16   but as long as they have all the necessary conditions in terms

17   of financial strength, market presence and satisfactory

18   customers -- customer satisfaction indexes and dealer

19   satisfaction indexes, they will be provided with the

20   opportunity.

21   Q.   And if they decline the opportunity, there won't be any

22   negative repercussion for them?

23   A.   Absolutely not.

24   Q.   Okay.

25            MR. TRACHTMAN: Thank you, I have no more questions.
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                           CHRYSLER LLC, et al.

1             THE COURT: All right, anyone else?

2             MR. BARKASY: I have a few.

3             THE COURT: Go ahead.



6    Q.   Good evening, I'm Richard Barkasy.   I represent the ad hoc

7    committee of consumer victims of Chrysler.    Would Fiat complete

8    the transaction if the assets of the debtors were not

9    transferred free and clear of tort claims?

10   A.   Fiat will not.

11   Q.   Why not?

12   A.   Because the -- we don't know the extent of those liens,

13   and this might materially affect the business case and,

14   therefore, the viability of our investment.

15   Q.   Do you know the amount of the current tort claims

16   outstanding against Chrysler?

17   A.   No, I don't.

18   Q.   Have you seen an analysis by Fiat of the amount of the

19   tort claims outstanding against Chrysler?

20   A.   No, because we were -- we have been always working under

21   the assumption that we would have not carried any lien or

22   encumbrances.

23   Q.   Was there ever a transaction to which Fiat agreed to be a

24   party that did not involve the filing of a bankruptcy?

25   A.   Actually, the current term sheet was negotiated before
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                           CHRYSLER LLC, et al.

1    that determination was taken.

2    Q.   So that at one point Fiat contemplated being involved in a

3    transaction in which a bankruptcy court sale order under

4    Section 363(f) would not be entered, is that correct?

5    A.   Before the end of March, that's correct, but at that time

6    we were still sizing the amount of funding that NewCo would

7    have required.

8    Q.   Is it true that the New Chrysler entity contemplated by

9    the term sheet at the time it was entered would have assumed

10   tort claims?

11   A.   No, that's not correct.

12   Q.   Was there a provision in the term sheet that provided that

13   tort claims would be extinguished through a process other than

14   bankruptcy law?

15   A.   Yes.

16   Q.   What was that?

17   A.   It would have stayed with the -- with Old Chrysler.

18   Q.   How would that have been accomplished?

19   A.   We simply said that we would -- we wanted the assets to be

20   transferred free of any lien and encumbrances.

21   Q.   But there would have been no -- at the time the term sheet

22   was entered, there would have been no bankruptcy court Section

23   363 order --

24   A.   That we would have -- we would have put in place the

25   standard representation and warranties pursuant to which the
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                            CHRYSLER LLC, et al.

1    seller should have taken responsibility of those liens.

2    Q.   But there would not have been a legal order entered by a

3    court that would extinguish those claims, is that correct?

4    A.   That's correct.   It would have a matter of negotiation.

5    Q.   And parties who were tort claimants would have had the

6    ability to pursue the new entity, arguing, among other things,

7    successor liability, is that right?

8             MR. HOLLEY:    Objection, Your Honor.   He's asking this

9    witness a legal conclusion about successor liability under

10   state law.

11            THE COURT:    You are asking for a legal conclusion.   I

12   mean, whether or not he could accomplish or how it could have

13   been accomplished, I don't really think, is relevant.     And

14   certainly he has stated his intention.

15            MR. BARKASY: All right.

16   Q.   But we can agree that at the time the first term sheet was

17   entered, Fiat was agreeable to a transaction where there would

18   be no sale order entered under Section 363(f) free and clear of

19   all liens, claims and encumbrances, correct?

20   A.   I said that at the term (sic) of the first term sheet

21   dated back January 20, 2009, we agreed to enter into a

22   transaction whereby the seller would have been required to face

23   those claims.

24   Q.   But there wouldn't have been a bankruptcy Section 363

25   order, correct?
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                               CHRYSLER LLC, et al.

1    A.   That's correct.      It was not a visage (sic) at that time.

2    Q.   Has Fiat done any analysis to determine the amount it

3    would cost to purchase retroactive insurance as to tort claims?

4    A.   No, we didn't.

5    Q.   Has Fiat had any discussions or negotiations with any tort

6    claimants or groups representing tort claimants?

7    A.   No, we didn't.

8    Q.   Would Fiat conclude the transaction if it was not free and

9    clear of tort claims if the tort claims were funded by another

10   source, such as the Treasury?

11   A.   We have never contemplated that scenario, so I cannot

12   answer neither positive nor negatively.

13              MR. BARKASY:    I have no further questions.    Thank

14   you, Your Honor.

15              THE COURT:    Thank you.

16              Anyone else?

17              MR. MCRORY:    Yes, Your Honor.   Your Honor, good

18   evening.   Russell McRory, Robinson Brog Leinwand Greene

19   Genovese & Gluck, for Performance Dodge, LLC and additional

20   dealers.



23   Q.   Good evening, Mr. Altavilla.

24   A.   Good evening.

25   Q.   I'll make this quick, as I promised earlier.      You
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                           CHRYSLER LLC, et al.

1    testified earlier there were two term sheets with Chrysler; the

2    first one was just with Chrysler, and the second one the United

3    States Treasury was also involved; is that correct?

4    A.   The United States Treasury was not part of the term sheet.

5    The term sheet has been negotiated under the supervision of the

6    United States Treasury, but they were not part of the

7    agreement.

8    Q.   With respect to the first term sheet, were any of the

9    terms contained in that term sheet -- did they relate to the

10   size of the dealer network?

11   A.   Not -- there was no specific number.    There was just a

12   provision that was calling for a restructuring of the existing

13   dealer network.

14   Q.   And with respect to the second term sheet, was there any

15   term regarding the size of the dealer network?

16   A.   No, there was, I would say, almost the same provision.

17   Q.   Did that restructuring refer to Chrysler's Genesis

18   Project?

19   A.   Primar -- the Genesis Project was the primary source of

20   the restructuring that we were envisaging to occur.     That's

21   correct.

22   Q.   And had the transaction with Chrysler closed under the

23   first term sheet with the Genesis Project, had -- would that

24   have been the primary vehicle for restructuring the dealer

25   network?
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                              CHRYSLER LLC, et al.

1    A.   We didn't assume in the term sheet that this was the only

2    criteria that would have been applied, but we -- as I said, we

3    had a provision stating that a structuring was required.   At

4    that time, we had not due diligence extensively Chrysler (sic)

5    so to determine whether or not the criteria or another would

6    have been the right one.

7    Q.   Has Fiat ever done a financial or economic analysis of the

8    cost of maintaining a dealer network, as Chrysler currently

9    has, or a dealer network, as is proposed, which would be 800

10   dealers less?

11   A.   No, we have not.

12   Q.   Are you aware of any party-in-interest to this transaction

13   that has prepared such a financial or economic analysis?

14   A.   Not to my knowledge.

15   Q.   Are you aware of what party-in-interest has required that

16   Chrysler reduce its dealer network by approximately twenty-five

17   percent?

18   A.   This has been Chrysler's own determination.

19   Q.   So, clearly, Fiat did not request this reduction, is that

20   correct?

21   A.   No, no, as I said, we requested a restructuring of the

22   dealer network without indicating the size of that

23   restructuring.

24   Q.   Did you -- but that -- did you make -- did the --

25              MR. MCRORY:   Withdrawn.
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                            CHRYSLER LLC, et al.

1    Q.   To your knowledge, did the United Auto Workers or their

2    VEBA request a reduction of the dealer network?

3    A.   This has never been part of any discussion between us and

4    the UAW and VEBA.

5    Q.   To your knowledge, in any of your discussions with the

6    United States Treasury, has the United States Treasury

7    requested or demanded any reduction in the dealer network?

8    A.   U.S. Treasury has never demanded such a restructuring, at

9    least in presence of Fiat.

10   Q.   Are you aware of any request by any government agency,

11   including the Auto Task Force, that has demanded a reduction in

12   Chrysler's dealer network?

13   A.   We have never been part of a discussion in which the

14   Treasury has requested the restructuring.

15   Q.   If this transaction closes without an absolute requirement

16   of a particular number of dealers that are being terminated,

17   would Chrysler still go through with this deal -- I mean,

18   rather, would Fiat still go through with this deal?

19   A.   The answer is that a restructure needs to occur.    Whether

20   it occurs before or after the closing of the deal is not a

21   material difference.   I cannot indicate whether there is a

22   restructuring that would have been structured by NewCo without

23   being significantly different from the one that has been

24   implemented so far.    As I said, Fiat and Chrysler did agree

25   (sic) the methodology for the selection of the dealer network.
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                              CHRYSLER LLC, et al.

1    We agreed on the seven criterias that should have been used,

2    and then I think that the number of dealers that have been

3    involved in the restructuring is coming out of the simple

4    application of this methodology.     So we would have used the

5    same methodology because it's exactly the same that we use in

6    Europe.    So --

7    Q.   And is Fiat -- the methodology, though, is being applied

8    by Old Chrysler, is that correct?

9    A.   That's correct.

10   Q.   And Fiat has not -- has -- you testified earlier that Fiat

11   is not taking any active role in the selection or -- of those

12   dealers, correct?

13   A.   No.

14   Q.   Does the -- does Fiat have any objection to this

15   bankruptcy court taking an oversight role on the selection of

16   those dealers for rejection?

17              MR. HOLLEY:    Objection, Your Honor.

18              UNIDENTIFIED SPEAKER:    Objection.

19              THE COURT:    What?

20              MR. HOLLEY:    I don't think it's appropriate, Your

21   Honor, to ask --

22              THE COURT:    I don't think you start negotiating from

23   the podium, right?      Especially when it involves something I'm

24   going to have to do.

25              MR. MCRORY:    Your Honor --
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1             THE COURT:    You know, unless you're talking about the

2    rejection process itself, I'm not really sure what you're

3    referring to.

4             MR. MCRORY:   Well, Your Honor, what I'm trying to

5    just establish is who is exactly making the decisions.

6             THE COURT: I think you did that.


8    Q.   I'll just conclude, Mr. Altavilla, with one more question.

9    Is the rejection of any certain number or any certain

10   percentage of Chrysler dealers a condition for you closing on

11   the contract with Chrysler?

12   A.   No, a number has never been a condition to close.

13            MR. MCRORY: Thank you, Your Honor.   No further

14   questions.

15            THE COURT: Thank you.

16            Is there anyone else on -- no, before we get to

17   redirect, because we're going to take a break.   I'm going to

18   take approximately a fifteen-minute break, and then I'm going

19   to --

20            MR. SULLIVAN: It'd be just about five minutes, Your

21   Honor.

22            THE COURT: All right.

23            MR. SULLIVAN: I can wait until after the break.

24            THE COURT: No, go ahead.

25            MR. SULLIVAN: James Sullivan of Arent Fox, counsel
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1    for Superior Industries, Timken and Harman.



4    Q.   I just have a couple of questions regarding the master

5    transaction agreement, a copy of which is right before you.        Do

6    you see that?   It's right on the podium.

7    A.   Yes.

8    Q.   You indicated in your direct that you were in charge of

9    negotiating that agreement on behalf of Fiat; is that correct?

10   A.   That's correct.

11   Q.   Okay.   And I take it that you're familiar with the

12   provisions contained in that agreement?

13   A.   I'm familiar with the contents of the master transaction

14   agreement.   I'm not a lawyer.

15   Q.   Okay.   Can you flip to pages 6 and 7 of the agreement?

16   Actually, why don't we start with page 5.     I apologize.    In

17   Section 2.06(a), the definition of assumed contracts is defined

18   there.   Do you see that?

19   A.   Yes.

20   Q.   Okay.   It's my understanding based upon conversations that

21   I had with your counsel that the definition of assumed

22   contracts, as used in this agreement, is synonymous with the

23   definition of assumed agreements under the sale order.       Is that

24   your understanding as well?

25   A.   I'm not sure I have the legal background to answer your
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1    question properly.

2    Q.   Are you -- have you reviewed the sale order in this case

3    at all, the proposed sale order?

4    A.   Have you reviewed -- sorry?

5    Q.   Have you reviewed the sale order that the parties are

6    requesting be entered by the judge?

7    A.   No, I don't.

8    Q.   Can I direct you to page 7 on the top there, the

9    definition of excluded -- I'm sorry, the excluded contracts,

10   2.07(a)?

11   A.   Okay.

12   Q.   Okay.   Are you generally familiar with the definitions of

13   assumed contracts and excluded contracts as used in this

14   agreement?

15   A.   No, I don't.

16   Q.   Were you involved at all in the drafting or negotiation of

17   sections 2.06 or 2.07 --

18              THE COURT:   Isn't this line of questioning much

19   better dealt with with counsel for Fiat and then clarification

20   on the record if there's some disagreement between the

21   definitions in the two documents?

22              MR. SULLIVAN:   Your Honor, I was trying to have a

23   conversation with counsel, but he doesn't want to talk to me,

24   so I have to go through his client.

25              THE COURT:   Well, I think it may have been better to
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1    ask me instead of -- I mean, I don't think this client can

2    provide any information when you're going to determine whether

3    or not two documents' definitions are synonymous.     I mean,

4    I --

5                MR. SULLIVAN: I'm happy to take these up with his

6    counsel, Your Honor.

7                THE COURT:   And you're controlled by the -- I mean,

8    ultimately if there's an order signed you're going to be

9    controlled by the order and not what this witness -- I don't

10   think what the witness's understanding of what these

11   definitional terms mean.     The document will speak for itself.

12   So it's going to need to get straightened out at some point, if

13   we ever get to that point.

14               MR. SULLIVAN:   I think the problem is, Your Honor, is

15   I'm not exactly sure what the document says, and I'm trying to

16   clear up some of the ambiguity.     And so it would certainly be

17   helpful if I had some conversations with counsel to try to

18   clarify it, but at that point in the juncture I haven't been

19   granted --

20               THE COURT:   Well, then you file -- I mean, if you get

21   there I assume you filed an objection, right?

22               MR. SULLIVAN:   Yes, Your Honor.

23               THE COURT:   So that objection has to be heard at

24   argument.    I mean, I just don't see -- you can ask the witness

25   a question, but I don't see how this witness is going to shed
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1    light on this -- on these defined terms.

2               MR. SULLIVAN: Well, based upon his answers so far I

3    probably agree with you, Your Honor.


5    Q.   Is there any -- is there any witnesses in the courtroom

6    that you're aware of that would have knowledge regarding

7    Sections 2.06 and 2.07 of the -- this agreement other than the

8    lawyers?

9    A.   No.

10              MR. SULLIVAN: Thank you, Your Honor.

11              THE COURT: All right, thank you.

12              Is there anyone else before redirect?

13              All right.   What we're going to do is take a fifteen-

14   minute break, and then I'm going to come back and I want to

15   revisit, before redirect, the prior two rulings regarding the

16   limitation on the cross-examination of this witness.    And I

17   will then hear, before ruling on that reexamination, hear from

18   the parties again with respect to the relevancy argument and

19   then determine whether or not this witness continues tonight or

20   needs to be made available tomorrow.    But I will return at

21   approximately 7:25.

22        (Recess from 7:09 p.m. to 7:26 p.m.)

23              THE COURT:   All right, I'm going to need, I think,

24   four counsel to address this issue:    counsel from White & Case

25   who handled the cross, Mr. Bromley on behalf of UAW,
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1    Mr. Bienenstock, and counsel from Squire Sanders.     And I guess

2    in lieu of Mr. Bienenstock we have another --

3             MS. LIU:   Yeah, Judy Liu in lieu of Mr. --

4             THE COURT:     I try to avoid saying that.

5             MS. LIU:   Or as The Times said, Your Honor, you have

6    another lawyer.

7             THE COURT:     Excuse me?

8             MS. LIU:   I said as The New York Times said on page

9    B4 of yesterday's edition in identifying me, they said, "Judy

10   Liu, another lawyer."

11            THE COURT:     All right, do we have everyone?   You need

12   a microphone?   And this -- I'm trying to retrace what happened.

13   As I sustained the objection as being outside the scope of the

14   direct, and there was an issue of relevancy raised, but I

15   didn't rule on a relevancy issue.    And then when counsel from

16   Squire Sanders went down the same path, I again ruled it was

17   outside the scope of direct and again relevancy was raised.

18   But then counsel from White & Case, Mr. Kurtz, raised the issue

19   about calling the witness on direct.    And then counsel -- well

20   no, I think it was Mr. Bromley that then said he would still

21   object if the witness was called tomorrow or later today on

22   direct on the relevancy issue.

23            So it seems to me that I need to deal with the

24   relevancy issue to determine whether or not this witness,

25   either in a continuation of the cross or availability for
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1    direct -- in either event I think I have to deal with

2    relevancy.    And the sooner I deal with relevancy, the better

3    this witness is going to know when his testimony is going to

4    end, and everyone else.     Is that a fair --

5                MR. ZAKIA:   Yes, Your Honor.

6                THE COURT:   -- recollection of what happened?     All

7    right.   Now Mr. Kurtz -- and I know I'm only directing this

8    question to you, I know you're not handling the witness, but

9    you raised a different issue.      I assume that if this is done on

10   cross by your counsel that your intention is not to call this

11   witness on direct?

12               MR. KURTZ:   That's correct, Your Honor.   As a

13   courtesy we would extend.

14               THE COURT:   Right.   So that sets the stage for the

15   argument.    So let's come back to the argument on relevancy, and

16   I'll let counsel from White & Case -- why is that line of

17   questioning that you wanted to pursue relevant to the issues

18   before the Court?

19               MR. ZAKIA:   Thank you, Your Honor.   We would submit

20   that it's relevant for several reasons.      First, and most

21   fundamentally, this Court is being called upon to approve a

22   transaction to which various components of the equity split of

23   New Car Co. are attached as exhibits, and one of that is the

24   VEBA agreement which provides for a certain amount of equity in

25   New Car Co. to be provided to the UAW VEBA as one-half of the
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1    consideration to be paid to the VEBA for the restructuring of

2    Chrysler's existing pre-petition VEBA obligation.       So the

3    connection between that issue and the very transaction that the

4    before the Court for approval is, in and of itself, sufficient

5    to establish relevance.

6                Secondly, however, Your Honor, the objection that we

7    have filed asserts, and obviously this is an issue that is in

8    dispute and many other parties may have a different view, and

9    the Court may ultimately rule, but our argument is that the

10   equity and other benefits associated with New Car Co. are

11   directly related to the sub rosa reorganization of existing

12   Chrysler.

13               THE COURT:   But that's a legal argument.

14               MR. ZAKIA:   No, but, Your Honor, we need to make the

15   factual record that's -- we need to be allowed to put in the

16   proof that could support that issue.     Okay.   And with respect

17   to how and in which manner the equity and other benefits

18   associated with New Car Co. relate to the preexisting

19   obligations of Chrysler and those relationships --

20               THE COURT:   Even if they were one for one -- assume

21   that they were one for one and it was no different than the

22   assumption of a contract and there is a deficiency claim in a

23   contract, the buyer decides to assume it under the Bankruptcy

24   Code, the cure amount would be the payment of a pre-petition

25   amount due.    It's accepted that you can do that under the
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                           CHRYSLER LLC, et al.

1    assumption of an assignment of a contract, and so whatever that

2    amount is, it is a pre-petition amount, it is paid.    Other pre-

3    petition claimants often would not be paid.

4             So you have a situation here where this is a pre-

5    petition amount due, an obligation of Chrysler.    You have New

6    Chrysler, I believe, assuming that obligation.    And it's argued

7    that New Chrysler believes in discussions with the UAW on what

8    their -- to get their agreement to certain concessions in their

9    contract they agree to do to assume certain liabilities with

10   respect to the VEBA trust.    I mean, that seems what the -- how

11   the transaction is portrayed.

12            So how much more facts do you need?     Those are --

13   seem -- those are the facts. Now, you can argue sub rosa; I

14   don't know whether it was or it isn't.    It is -- but whatever

15   the number -- whatever the value of the equity -- however it

16   relates to the value of the -- to the amount to the obligation

17   due from Old Chrysler to the VEBA, what is -- what difference

18   does it make?

19            MR. ZAKIA: Well, Your Honor, I think the valuation of

20   that benefit being paid as a result of that pre-petition claim

21   would be directly relevant.   Let's say hypothetically -- I'm

22   not asking the Court or anyone to agree with me -- that the

23   value of that benefit exceeded the pre-petition claim, and

24   value in excess of the VEBA's claim was being paid as a result

25   of this transaction and the secured lenders were being
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1    impaired.    That would be a fact that would be relevant to this

2    issue.   And in fact, it is, I believe, an issue that is in

3    dispute as regard to what the value of this equity is.       And

4    remember, Your Honor, this is also just one of the bases upon

5    which this issue is relevant.

6                I mean, another issue is the good faith issue.    One

7    of the issues that has again been put in contest by our

8    objection is the role of the United States government and the

9    way in which it, we would submit, controlled this process.         We

10   would submit that if the United States government was

11   effectively negotiating on all sides of the transaction, that

12   can't be a good-faith purchaser.   I don't think there's any

13   dispute that the good-faith purchaser requirement under 363 is

14   going to be a central issue that the Court is going to need to

15   rule on.    I believe that the witness has already testified that

16   the ability to take these assets free and clear of any liens,

17   which would require a finding of good faith, is essential to

18   their willingness to go forth on the transaction.     So, again,

19   I think that issue is directly relevant.

20               And so the way in which these benefits, which we

21   believe and we assert are being improperly diverted from the

22   pool of assets to which our client has the first claim, is

23   directly relevant to all of these issues and is -- it is

24   impossible to unwind that from the transaction that Your Honor

25   is being asked to approve.
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1              THE COURT:   All right.

2              Squire Sanders, do you wish to add anything?

3              MS. BROWN:   Just one thing, Your Honor.    I think our

4    inquiry is a bit more limited.      We're focusing on the actual

5    terms.   I don't think the record is clear as to the terms of

6    the restructuring of Chrysler's obligations to VEBA.      And so

7    that was where the focus of our questions was going to be so

8    that we could make the sub rosa argument using the record

9    developed.

10             THE COURT:   All right.

11             Ms. Liu or Mr. Bromley.

12             MS. LIU:   I think the point that Mr. Bienenstock was

13   trying to make earlier, and I'll just, I guess, reiterate it,

14   is that I think that the problem is that there's a confusion

15   between the entity that's the seller, and Fiat.      Fiat is --

16   sorry, the entity that's the buyer, and Fiat.     Fiat is not the

17   buyer.   The buyer is the acquisition company.    And the terms of

18   this sale and what goes into that acquisition company and what

19   comes back to Car Co. in exchange is the sale transaction that

20   you've been asked to approve.    How the acquisition company

21   whacks up its equity and the deals it separately makes is not

22   really what is the relevant transaction before you, and I think

23   that's the point that Mr. Bienenstock was making earlier.         And

24   so to put Fiat on the stand and ask them all of these questions

25   is not really relevant because it's beyond the scope of what
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1    you have to consider.

2             The purchaser purchases the assets, it gives

3    consideration to Car Co. and that's the sale transaction.    Then

4    Acquisition Co. can make all kinds of arrangements and deals

5    with others that are not part of the sale, and that is what the

6    essence is of what my partner Mr. Bienenstock was saying.

7             THE COURT:     All right.

8             Mr. Bromley?

9             MR. BROMLEY:    Your Honor, there's a couple of points

10   that -- you have to think first that we're talking about

11   relevancy, right?   And so the question is what is relevant to

12   this hearing and to what's before the Court, an admittedly

13   already very long hearing, which we now have the prospect of

14   continuing into tomorrow and beyond?   And so the question is

15   are the three points that White & Case has raised anything that

16   raises this line of inquiry with the Fiat witness to the point

17   of relevancy?

18            First, with respect to the approval of the

19   transaction, it's true, we're here to approve a transaction,

20   and it's true that we've had a lot of discovery; very expedited

21   discovery over a long period -- a very short period of time.

22   But notwithstanding that, the VEBA document, as Mr. Zakia

23   refers to it, is actually not the VEBA document; it is the UAW

24   retiree settlement agreement.    It has been available since the

25   sale motion was filed, and it goes to the nature of the
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1    fundamental misunderstanding, perhaps intentionally, that the

2    objectors have with respect to the way the VEBA is addressed.

3    It is a settlement agreement between the new company and the

4    UAW with respect to claims that relate to the old VEBA,

5    admittedly, but that relate to the successorship claims that

6    would be had against the new company.

7              Now, in addition to that -- that's what the document

8    says, right?   The authenticity of that document has been

9    stipulated to.   That document has been available from day one.

10   That's what the document says.   In addition to that, Your

11   Honor, we have submitted a response and a declaration of Dave

12   Curson.   Mr. Curson is the director of special projects at the

13   UAW, and he was available for deposition in Detroit on Monday,

14   and Mr. Zakia was there and had the opportunity not only to

15   depose him but also to have his declaration given to him during

16   the deposition and to ask him questions about that.

17             Now, Mr. Curson will be available to testify, whether

18   it's tonight or tomorrow, but his declaration makes clear that

19   what we're talking about here, Your Honor, is there are two

20   things that were happening with respect to the UAW.   You had an

21   active labor agreement for active employees:   the collective

22   bargaining agreement that was being negotiated.   And as Mr.

23   Curson's declaration makes clear, and as his testimony will

24   make clear, there was not to be a collective bargaining

25   agreement for New Chrysler if retiree medical benefits were not
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1    taken care of.

2                So when you're talking about value that's being

3    delivered to the new company, as the declaration and our

4    response makes clear, this company needs to get up and running

5    immediately.    It needs the 26,000 employees that are

6    represented by the UAW.    And if it were not for the retiree

7    medical benefits, the settlement of which are being dealt with

8    in NewCo in connection with the UAW retiree settlement

9    agreement, not the VEBA agreement, there would not be a

10   workforce and there would not be a NewCo.

11               So we're talking about value that's being delivered

12   to NewCo.    We're talking about the ability of this company to

13   walk in and flip on the switch and get right back to work.         And

14   without the 26,000 UAW employees to do that, it wouldn't

15   happen.   That's what Mr. Curson's declaration says, that's what

16   his deposition said, that's what our pleadings say, and that's

17   what the UAW retiree settlement agreement says.

18               So when we're talking about relevancy, that is the

19   document we're talking about.    That is not the testimony that

20   Fiat's going to be able to provide.

21               When we talk about the sub rosa issue as to whether

22   or not it's relevant or not, that's a legal argument, Your

23   Honor, as you said.    And the fact is that there are loads of

24   agreements that are being assumed and assigned, whether or not

25   in a 363 sale or in an 1129 plan.     It always happens that the
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                             CHRYSLER LLC, et al.

1    contracts that are essential to the operation and success of

2    the business going forward, whether it's in a sale process or a

3    plan process, are chosen to be assumed and assigned and cures

4    paid.    But there's not a cure here.   What has happened is that

5    these contracts with respect to the collective bargaining

6    agreements and retiree medical benefits have been substantially

7    renegotiated, and there are concessions, major concessions,

8    including a no-strike clause through 2015 that was absolutely

9    essential for this new company to survive.     The UAW has never

10   in its history given a six-year no-strike clause.    The UAW has

11   gone way out of its way and is tired of being a scapegoat with

12   respect to this, particularly with respect to the purported

13   pensioners from Indiana.

14              Then we talk about good faith, Your Honor.    The good

15   faith -- in my experience, I've never seen the capital

16   structure of the purchaser in a 363 sale be an issue of good

17   faith.    We're talking about the negotiations in terms of the

18   transaction, and that's what's before you.

19              The master transaction agreement is the transaction

20   agreement that's being approved, and it's the good faith with

21   respect to the negotiation of that agreement, Your Honor, that

22   is relevant.

23              That's all I have, Your Honor.

24              THE COURT:   All right.

25              Anything further?
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1               MS. FELDSTEIN:    Good evening, Your Honor.   Hydee

2    Feldstein of Sullivan & Cromwell, very briefly for Fiat.         I

3    wanted to point the Court to the transcript from the District

4    Court --

5               MR. HOLLEY:    Your Honor, if there's a one-counsel

6    rule --

7               THE COURT:    No, you're right.   I understand that.

8    All right.   One counsel will handle this witness.

9               MS. FELDSTEIN:    This is argument on relevance, Your

10   Honor, as opposed to witness.

11              THE COURT:    I understand, and the same counsel that

12   handled the witness will handle the argument on relevance.

13              MS. FELDSTEIN:    Thank you, Your Honor.

14              MR. HOLLEY:    Your Honor, I wasn't one of the four

15   people identified by the Court, and I'm happy --

16              THE COURT: No, go ahead.

17              MR. HOLLEY:    No, actually I'm not even quite sure

18   what --

19              THE COURT:    And if Fiat wants to be heard --

20              MR. HOLLEY:   -- I'm not quite sure what point Ms.

21   Feldstein was going to make, so rather than just wing it I

22   think I'll forego the opportunity.     Thank you, Your Honor.

23              THE COURT:    All right, anyone else?

24              All right, it seems to me that the only -- I don't

25   think it has any relevance to value.     I mean, I think that has
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1    been a misleading issue for quite a while as to value and the

2    VEBA and once they're receiving in the equity, et cetera, or

3    under the settlement agreement.     I think it is -- if anything,

4    this witness has been involved in the process that brought us

5    here today, and his testimony may have some relevance to good

6    faith.     And to that extent I'll let an examination on the issue

7    of his involvement in the negotiations, to whatever extent they

8    are, and what he knows about those negotiations and, in

9    addressing the issue raised by Squire Sanders, and allow the

10   questioning of the witness to set forth the structure as he

11   knows it.    And I think we'll begin kind of in the order that we

12   dealt with this, with White & Case continuing their cross-

13   examination, and address questions to the witness with respect

14   to the good-faith issue, but not in terms of the value.     I just

15   don't see the relevance.

16               Go ahead.

17               MR. SULLIVAN:   Thank you, Your Honor.   Thank you,

18   Your Honor.    I'll endeavor to be brief.



21   Q.   Mr. Altavilla, hello again.     First, before we begin, did

22   you speak with anyone over the course of the break concerning

23   your testimony?

24   A.   No.

25   Q.   No one at all?
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                            CHRYSLER LLC, et al.

1    A.   I consulted with my lawyer just to understand what was the

2    next step.

3    Q.   And what did your lawyer tell you about the next step?

4             MR. HOLLEY:   Your Honor, I object.   This witness was

5    off cross-examination, and any communications that I had with

6    him before he gets up on redirect -- it was my understanding he

7    was going to be off cross-examination -- were privileged and

8    they're not a proper subject of inquiry.

9             THE COURT:    Well, as long as you make the

10   representation that it didn't have to do with his testimony.

11            MR. HOLLEY:   They had to do with certain questions

12   that I might ask him on redirect, which I am entitled to ask

13   him -- to talk to him about before he testifies on redirect.

14            THE COURT:    No.   I mean, each witness that have

15   stepped down I've always directed them not to speak to their

16   counsel, and I didn't do it with this witness.    Now, I

17   understand what you're saying, in between cross, but when I

18   left the bench I said I wanted to rule -- I want to reconsider

19   the ruling, or I made some reference to considering the ruling,

20   prior to the redirect beginning.

21            MR. HOLLEY:   Yeah.

22            THE COURT:    So that meant there was a possibility, at

23   least in my mind, that cross would continue.

24            MR. HOLLEY:   I misunderstood, Your Honor, on that

25   subject --
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                               CHRYSLER LLC, et al.

1                THE COURT:    All right.

2                MR. HOLLEY:   -- and I apologize for that.     It was not

3    my intention to talk to him about his redirect examination

4                THE COURT:    Well --

5                MR. HOLLEY:   -- if it was continuing, but I did want

6    to talk to him about certain things I might ask him about on

7    redirect, which I -- at least in my experience, is a

8    permissible thing to do.

9                THE COURT:    Well he was still live for purposes of

10   cross.   So, all right, what's done is done.        I don't think

11   whatever you were going to discuss on redirect -- or you did

12   discuss with the witness for purposes of redirect has anything

13   to do with the issues that I've allowed the cross to address.

14               MR. HOLLEY:    Thank you, Your Honor.

15               THE COURT:    Go ahead with your cross-examination.


17   Q.   Mr. Altavilla, earlier we were speaking concerning

18   negotiations in which you personally participated between the

19   government and the UAW and Fiat concerning the VEBA trust.          Do

20   you recall that testimony?

21   A.   Yes.

22   Q.   And you did participate in those negotiations?

23   A.   To some of them, yes.

24   Q.   Okay.    And correct me if I'm wrong, but I believe your

25   participation in those negotiations occurred primarily during
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                             CHRYSLER LLC, et al.

1    the months of March and April, is that right, of 2009?

2    A.   That's correct.

3    Q.   Okay.   And -- or over the course of that period, about how

4    many meetings did you have concerning the negotiations with

5    respect to the VEBA trust and any equity interest it would or

6    would not receive in NewCo?

7    A.   Any number would be just a pure speculation.    Maybe ten,

8    maybe fifteen.

9    Q.   Okay.   But a large number?

10   A.   A large number, yes.

11   Q.   Did U.S. Treasury participate in each of those meetings?

12   A.   I would say yes.

13   Q.   Okay.   Did Chrysler participate in each of those meetings?

14   A.   Yes.

15   Q.   Okay.   So each of the meetings that you had with respect

16   to the VEBA trust involved both -- involved Fiat, the debtors,

17   or Chrysler, the UAW and U.S. Treasury?

18   A.   Yes.

19   Q.   Okay.   At what point in time was it determined that the

20   VEBA trust would receive 55 percent of the equity in NewCo?

21   A.   After we started the discussions about the overall

22   obligation of Chrysler with the VEBA, there was a determination

23   made by the UAW in conjunction with UST; we were not part of

24   that meeting.    And we were told that as a consideration for the

25   concessions that UAW was prepared to make, they were asking for
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                              CHRYSLER LLC, et al.

1    fifty-five percent of equity of NewCo.

2    Q.   Okay.   And those were concessions made with respect to the

3    VEBA, with respect to the collective bargaining agreement, with

4    respect to what?

5    A.   With respect to both of them.

6    Q.   So with respect to both the collective bargaining

7    agreement changes and the modifications of the VEBA payment

8    plan, your understanding was that the VEBA would receive equity

9    in New Car Co.?

10   A.   Yes.

11   Q.   Okay.   And who was it that determined that the VEBA would

12   receive fifty-five percent?

13   A.   As I said, I was not in that meeting.      It was a

14   determination -- an ask made by VEBA and the U.S. Treasury.          We

15   were not part of that meeting.

16   Q.   Were you ever present at a meeting where Mr. Bloom from

17   the President's Auto Task Force indicated that the VEBA would

18   receive fifty-five percent of the equity in New Car Co.?

19   A.   Yes, I was.     Mr. Bloom acted as sort of a spokesperson at

20   that meeting to --

21   Q.   And when did that meeting occur?

22   A.   I don't remember the date.

23   Q.   Okay.   But was it in April of 2009?

24   A.   I guess it was in April of -- probably early April.

25   Q.   Okay.   And at that meeting -- going into that meeting,
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                              CHRYSLER LLC, et al.

1    there was not agreement among the parties as to the equity that

2    would be received by the VEBA trust, right?

3    A.   No, there wasn't.

4    Q.   Okay.    And at that meeting Mr. Bloom indicated that fifty-

5    five percent -- he put the fifty-five percent number on the

6    table with respect to the equity position in New Car Co. of the

7    VEBA trust?

8    A.   The fifty-five percent was the outcome of the negotiation.

9    Q.   At that meeting?

10   A.   Part of this negotiations happened in the previous meeting

11   between UAW and UST; it's my recollection, and so it's a

12   speculation.    And part of the discussion happened when we were

13   all together.

14   Q.   But the first time you ever heard the fifty-five percent

15   number was from Mr. Bloom?

16   A.   That's correct.

17   Q.   And going into that -- and that was at the meeting in

18   Washington that you testified about --

19   A.   Yes.

20   Q.   -- a few minutes ago?

21   A.   Yes.

22   Q.   Okay.    And going into that meeting, there was no agreement

23   with respect to the VEBA trust and its equity as far as you

24   were concerned?

25   A.   No.
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                             CHRYSLER LLC, et al.

1    Q.   Okay.   And after Mr. Bloom put forth that fifty-five

2    percent number, that's when that deal was reached, and that's

3    the number that remains to this day?

4    A.   Yeah.

5             MR. BROMLEY:    Your Honor, mischaracterizes testimony.

6             MR. ZAKIA:    Well, okay.

7    Q.   The fifty-five percent number proposed by Mr. Bloom at the

8    meeting is the current percentage equity that is -- that the

9    VEBA trust will own in New Car Co. if the transaction before

10   the Court is approved, true?

11            MR. BROMLEY:    Objection, Your Honor.   I believe that

12   the word was "announced", not "proposed".

13            THE COURT:    I couldn't hear what you said.    Mr.

14   Bromley, get --

15            MR. BROMLEY:    Oh.   I believe the word that the

16   witness used was "announced," not "proposed".

17            MR. ZAKIA:    Your Honor, the witness can -- well, I'll

18   let the Court rule, but I thought the --

19            THE COURT:    Restate the question.

20            MR. ZAKIA:    Yes, Your Honor.

21   Q.   At the meeting in Washington, Mr. Bloom indicated that a

22   fifty-five percent equity for the VEBA would be acceptable to

23   the Presidential Task Force, is that right?

24   A.   Would -- no, would have been -- was a number acceptable to

25   all the parties involved.
                                                              - 377 -

                                CHRYSLER LLC, et al.

1    Q.   Mr. Bloom told you that the fifty-five percent number was

2    acceptable to everybody?

3    A.   No.    He made this proposal as its recommendation after the

4    consultation with UAW --

5    Q.   Okay.    So he --

6    A.   -- and fulfilled -- and was fulfilled in Chrysler to

7    assess whether or not that was a fair deal.

8    Q.   So Mr. Bloom communicated to you that fifty-five percent

9    of the equity of New Car Co. would be acceptable to the UAW and

10   to the President's Auto Task Force?

11   A.   Yes.

12   Q.   Okay.    And before that, you had not had any discussions

13   with anyone concerning a fifty-five percent --

14   A.   No.

15               MR. BROMLEY:    Objection, Your Honor.   Asked and

16   answered.

17               MR. ZAKIA:   I'm just trying to clarify the record,

18   Your Honor.

19               MR. BROMLEY:    Four times asked and answered.

20               THE COURT:   Just a minute Mr. Bromley.

21               All right, I believe that was asked and answered.      I

22   don't think you need to clarify it.

23               MR. ZAKIA:   Okay, Your Honor.

24   Q.   Now, just so that I'm clear, I mentioned the fifty-five

25   percent number.    Initially after the closing of the
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                            CHRYSLER LLC, et al.

1    transaction, the VEBA trust percentage of equity will actually

2    be higher than fifty-five percent, is that right?

3    A.   Rephrase your question, please.

4    Q.   Yeah.   Immediately upon -- will there come a time when New

5    Car Co. will issue sixty-four percent of its stock to the VEBA

6    trust?

7    A.   Yeah, when Fiat holds twenty percent of NewCo, it is true

8    that the VEBA fund will be entitled to 67.66 percent, but only

9    because Fiat is owning 20 percent.

10   Q.   Okay.   And, so, for how long of a period -- well, there

11   are certain milestones in the agreement that allow Fiat to step

12   up their equity from twenty percent to thirty-five percent,

13   right?

14   A.   That's correct.

15   Q.   And what are the time periods for those milestones to be

16   achieved?

17   A.   There is no fixed time period.    There is a deadline which

18   is set in July 2012.   If by then Fiat does not accomplish the

19   three milestones, we'll get an option to buy at the fair market

20   value.   The three milestones are technical milestones.   We do

21   have expectations in terms of the timing which those milestones

22   will be accomplished, but it's a matter of -- and three

23   industrial projects to be developed.    The sooner we start, the

24   sooner we'll get there.

25   Q.   Okay.   So until those milestones are reached, the VEBA
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                              CHRYSLER LLC, et al.

1    will hold that equity that eventually will be shifted over to

2    Fiat if the milestones are accomplished?

3    A.   That's my understanding.

4    Q.   Now, when did the negotiati -- let me ask you this.   The

5    negotiations that you had with the Auto Task Force and the UAW

6    concerning the equity, when were those concluded?    When was

7    that deal done?

8    A.   On the VEBA?

9    Q.   Yes.

10   A.   The final agreement also on the note was reached the last

11   week of April.

12   Q.   Okay.    Were there any negotiations, though, between that

13   meeting in Washington with Mr. Bloom and the execution of the

14   final agreement with regard to the structure of that equity

15   holding?

16   A.   Most of the discussions afterwards were around the terms

17   of the note.

18   Q.   Okay.

19   A.   I don't remember any specific discussion again on the

20   equity stake.

21   Q.   Okay.    And the note is the -- is it 4.8 billion dollar

22   note?

23   A.   4.6 billion note.

24   Q.   4.6 billion dollar note, and that's going to be issued by

25   New Car Co.
                                                              - 380 -

                                CHRYSLER LLC, et al.

1    A.   Yeah.

2    Q.   Okay.     And that's going to be issued by New Car Co. to the

3    VEBA trust?

4    A.   Yes.

5    Q.   And that's also in consideration for the restructuring of

6    the VEBA trust's obligations to Chrysler, is that right?

7    A.   It's --

8                MR. BROMLEY:    Objection, Your Honor.   Calls for a

9    legal conclusion.

10               MR. ZAKIA:   Well, if he has an understanding from his

11   participation in the negotiations.

12               MR. BROMLEY:    Well, counsel continually

13   mischaracterizes the agreement to his own ends.

14               THE COURT:   All right, restate your question.   Let me

15   hear it.

16               MR. ZAKIA:   Okay, I'd be happy to.    I'm not trying to

17   mischaracterize anything, I'm sorry.

18   Q.   But in consideration for the VEBA's restructuring of its

19   obligation -- of Chrysler's obligation to it, it's receiving

20   two pieces of consideration, right?

21               THE COURT: That's a legal conclusion as to

22   consideration, isn't it?

23               MR. ZAKIA: I'd be happy to rephrase.

24               THE COURT: Go ahead.

25   Q.   Two things of value that are being paid by New Car Co.,
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                              CHRYSLER LLC, et al.

1    okay, to the VEBA, right?

2    A.   Yes.

3    Q.   Okay.    And that's the equity that we've talked about?

4    A.   Yes.

5    Q.   And the note?

6    A.   Yes.

7    Q.   And the note is, you said, 4.6 billion dollars?

8    A.   Yes.

9    Q.   And you said that there were negotiations concerning the

10   note.   Those negotiations can turn -- can -- centered on the

11   payment schedule that was going to relate to the note?

12   A.   All the terms of the note, payment schedule dates -- all

13   the terms of that.

14   Q.   Okay.    And so then those negotiations took place between

15   the meeting with Mr. Bloom and the UAW and Fiat and the

16   ultimate execution of the final agreement?

17   A.   That's correct.

18   Q.   And did the United States government participate in all of

19   those negotiations?

20   A.   Yes, participated to all of those negotiations, yes.

21   Q.   Okay.

22               MR. ZAKIA:   Thank you.   Nothing further.

23               THE COURT:   All right.

24               Squire Sanders?

                                                                - 382 -

                                CHRYSLER LLC, et al.

1    BY MS. BROWN:

2    Q.   Mr. Altavilla, is it your understanding that in light of

3    the fifty-five percent equity stake in New Chrysler and the

4    note that there will be no obligations owing by Chrysler to the

5    VEBA trust?

6                MR. BROMLEY:    Objection, Your Honor.

7                THE COURT:   All right, what's your objection?

8                MR. BROMLEY:    Calls for a legal conclusion.

9                THE COURT:   All right, it does.      And also when you

10   mention Chrysler -- you can restate the question, but you also

11   need to talk in terms of Old Chrysler versus New Chrysler to

12   make sure the witness is focused on the entity that you're

13   trying to gather information about.

14               MS. BROWN:   Okay, I understand, Your Honor.

15   Q.   As I understand your testimony, Mr. Altavilla, the -- one-

16   half of the Chrysler obligations to VEBA are being restructured

17   as a fifty-five percent equity stake in New Chrysler, is that

18   correct?

19               MR. BROMLEY:    Objection, Your Honor.    Calls for a

20   legal conclusion.    And there was no clarification of New

21   Chrysler versus Old Chrysler.

22               MS. BROWN:   I'm sorry, I thought I addressed New

23   Chrysler.

24               THE COURT:   I thought it did.   Go ahead, restate the

25   question the way you stated it.      I think you clarified it.
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                             CHRYSLER LLC, et al.

1    Q.   As I understood your testimony, one-half of Old Chrysler's

2    obligations to the VEBA are to be restructured as a fifty-five

3    percent equity stake in New Chrysler, is that correct?

4    A.   It's correct.   Technically it's correct, but we need to --

5    we need to understand that it was an overall -- a global deal

6    reached with the VEBA.    We ended up there as the outcome of all

7    the discussion that we had with UAW and the -- and VEBA.

8    Q.   And the other half of Old Chrysler's obligations to the

9    VEBA are to be restructured as the 4.6 billion dollar note to

10   be assumed by New Chrysler, is that correct?

11   A.   That's correct.

12   Q.   And is it your understanding then that Old Chrysler would

13   no longer have any obligations to the VEBA trust?

14   A.   I know nothing about the obligation of OldCo.      I'm not

15   involved with OldCo.

16   Q.   Okay.

17            MS. BROWN:     Thank you, no more questions.

18            THE COURT:     All right.

19            Redirect?     Well, Mr. Bromley, you wanted to ask the

20   witness something?

21            MR. BROMLEY:    Just a couple of questions, Your Honor.

22            THE COURT:     All right, go ahead.



25   Q.   Mr. Altavilla, you're not a lawyer, are you?
                                                                   - 384 -

                                  CHRYSLER LLC, et al.

1    A.     I'm not a lawyer.

2    Q.     Did you negotiate with lawyers representing the UAW the

3    terms of the UAW retiree settlement agreement?

4    A.     Our lawyers did.

5    Q.     Your lawyers did, but you didn't, right?

6    A.     I didn't.

7    Q.     So do you have a working knowledge of the UAW retiree

8    settlement agreement?

9    A.     A working knowledge is probably a bit of a stretch.

10   Q.     So is it fair to say that you have a businessperson's

11   knowledge?

12   A.     Yes.

13                 MR. BROMLEY:    Thank you.

14                 THE COURT:    All right, thank you.

15                 Redirect?

16                 MR. HOLLEY:    None, Your Honor.

17                 THE COURT:    All right.   You may step down.    Thank

18   you.

19                 THE WITNESS:    Thank you very much.

20                 THE COURT:    All right.   And you will not be called as

21   a witness tomorrow, so you are free to go wherever you need to

22   go, in the envy of everyone else here.

23                 I think we should pick up tomorrow morning at 10:00.

24   There is an agenda, I think, that was circulated.        The agenda,

25   I believe, reflects the utilities motion going forward tomorrow
                                                            - 385 -

                             CHRYSLER LLC, et al.

1    at 10:00 and then this hearing picking up at 10:15.     I haven't

2    seen the agenda, but that's what I understand it's going to

3    say, or what it says.

4               MR. TOGUT:   That's correct, Your Honor.   That's

5    correct.   There are no disputed utilities tomorrow, but there

6    are some statements we have to make on the record.     So it'll be

7    very quick.

8               THE COURT:   All right, then the sale hearing will

9    continue at probably by 10:15 tomorrow morning.   All right,

10   thank you.

11        (Whereupon these proceedings were concluded at 8:04 p.m.)














                                               - 386 -


2                           I N D E X


4                        T E S T I M O N Y

5    WITNESS               EXAM BY           PAGE   LINE

6    Robert Manzo          Mr. Cullen        59      16

7    Daniel McElhinney     Ms. Ball          72          1

8    Thomas LaSorda        Mr. Shumaker      79      17

9    Thomas LaSorda        Ms. Asner         93      20

10   Thomas LaSorda        Mr. Sullivan      149         5

11   Thomas LaSorda        Mr. Barkasy       153         6

12   Thomas LaSorda        Mr. Shumaker      154     10

13   Robert Manzo          Mr. Kurtz         157     11

14   Robert Manzo          Mr. Barkasy       255     19

15   Robert Manzo          Mr. McRory        262         1

16   Robert Manzo          Mr. Esserman      268         1

17   Robert Manzo          Mr. Cullen        272         1

18   Robert Manzo          Mr. Kurtz         281     15

19   Alfred Altavilla      Mr. Holley        297     19

20   Alfred Altavilla      Mr. Zakia         307     21

21   Alfred Altavilla      Ms. Brown         336         5

22   Alfred Altavilla      Mr. Orr           342         7

23   Alfred Altavilla      Mr. Trachtman     343     21

24   Alfred Altavilla      Mr. Barkasy       346     15

25   Alfred Altavilla      Mr. McRory        350         7
                                                        - 387 -


2                              I N D E X, cont'd


4                              T E S T I M O N Y

5    WITNESS                     EXAM BY              PAGE   LINE

6    Alfred Altavilla            Mr. Sullivan         355     12

7    Alfred Altavilla            Mr. McRory           355     18

8    Alfred Altavilla            Mr. Sullivan         371         5

9    Alfred Altavilla            Ms. Brown            382     11

10   Alfred Altavilla            Mr. Bromley          384         9


12                              E X H I B I T S

13   NO.        DESCRIPTION                           ID.    EVID.

14              New export report of Robert Manzo             69

15              dated 5/20/09 and supplemental

16              declaration dated 5/26/09

17              Notice of assumption and assignment           73

18              and related schedules dated 5/25/09

19   Debt. 25   Declarations                                  93

20   Pens. 3                                                 191

21   Pens. 5    Chrysler breakup analysis                    250

22   Pens. 7    Capstone document                            253

23   Pens. 11   E-mail chain from 4/10-11/09          281


                                                          - 388 -


2                            I N D E X, cont'd


4                              R U L I N G S

5    DESCRIPTION                                        PAGE   LINE

6    Motion of Indiana Pensioners to withdraw           45      12

7    reference with respect to sales motion and

8    trustee motion denied


10   Application of the creditors committee for order   58      146

11   approving retention of Kramer Levin Naftalis &

12   Frankel LLP as counsel granted













                                                         - 389 -


2                           C E R T I F I C A T I O N


4    I, Lisa Bar-Leib, certify that the foregoing transcript is a

5    true and accurate record of the proceedings.


7    ___________________________________




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13   Suite 580

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16   Date:   May 30, 2009










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