Fiat, which is the only company that has shown an interest in acquiring most of Chrysler’s assets, can walk away from the deal if it is not concluded by June 15. Commenting legal scholars do see the importance of the Court looking at the issues involved, but seem to feel that, in the end the sale to Fiat will be approved.

President Obama had promised a “quick” and “efficient” bankruptcy and this order by Judge Ginsburg has put a spoke in the wheels. For an in depth story on this surprising turn of events see Tuesday’s New York Times.

Fiat’s grand plans have been foiled by the Canadian parts manufacturer Magna International, which has joined with Russian bank, Sberbank to make a deal to buy the European operations of GM. Under the terms of the deal GM would retain a 35 per stake in the new company, the Russian government controlled Sberbank would take 35 per cent, Magna would hold 20 per cent and Opel’s employees would control interest in the remaining 10 per cent.

Chrysler’s long-term future, which would have brightened as part of a larger company, has darkened with Fiat’s apparent loss to Magna for GM’s European operations.

For an in depth analysis of this emerging story including its ramifications for the European Union, please read Saturday’s story in the New York Times.

Meanwhile, sources say that bankruptcy is far from certain in the GM restructuring case, and reports that the Obama administration will steer the automaker into bankruptcy as early as this week are premature. Citing a source familiar with the situation, the news association Reuters reported on Friday that negotiations will likely continue right up to the May 31 deadline. In addition, the sources pointed out that the Chrysler case, where the process continued until the deadline, would serve as a good comparison.

Magna International appeared to gain the early edge Friday in the race to buy Opel, surpassing rival bidders Fiat and RHJ International Inc.. German officials said they were leaning toward the offer submitted by the Magna, a Canadian car parts group, because its plan would leave open four manufacturing plants located in that country. With Federal elections looming in September, any merger plan containing the possibility of massive job losses would appear to be dead on arrival. German government officials, who prefer to remain anonymous, said the Magna offer was gaining significant support in Berlin. GM will make the final decision on who ultimately prevails in the battle for Opel, but the German government will have a say because it is seen as the likely source of financing guarantees for the eventual winner.

Bloomberg News reported that even though the Chinese automaker submitted a letter expressing interest in purchasing Opel a day after the May 20 deadline for bids, a concrete offer may not be forthcoming. Yu Bing, an analyst at Ping An Securities in Shanghai told Bloomberg that the risks were huge and that Chinese carmakers aren’t big or experienced enough and lack the technology and management skills to buy something like Opel. Bloomberg reported that, according to GM, Opel needs $4.6 billion (3.3 billion euros) in new government financing to survive. The carmaker is selling a majority stake in its European operations while preparing for a probable government-forced June 1 bankruptcy. The Magna and RHJ bids include cash, while Fiat’s calls for $9.8 billion (7 billion euros) of financing.

Fiat’s bid is two-pronged: It contains an offer for the Opel and Vauxhall units, and alternatively offers to also buy GM’s operations in Brazil and Argentina. The Fiat Chief Executive Officer Sergio Marchionne aims to create the world’s second-largest car company, second only to Toyota Motor Corp  by combining Fiat and Opel with Chrysler and GM Europe and possibly GM’s Latin American operations. Magna’s primary interest in Opel centers around increasing sales in Russia to about 1 million units, GM Europe CEO Carl Peter Forster said last week in a Bloomberg interview. Opel, which is headquartered in Ruesselsheim, near Frankfurt, and traces its roots in Germany back to the 19th century, has manufacturing facilities in St. Petersburg and Uzbekistan, which could accelerate growth in the two countries. Magna’s plan has also gained favor because it will keep the existing European management team in place.

The President stated that the unions have made enormous sacrifices, and potential concessions that they can live with.  Regarding  GM, Obama said that they’re still in the process of presenting their plans. He also said that GM  has always created lots of good products, and if they are able to get through these difficult times and engage in some of the very difficult choices that they’ve already made, they can emerge a strong, competitive, viable company.

President Obama went on to say that he would love to get the U.S. government out of the auto business as quickly as possible, noting that there are circumstance in which a bad recession compounded some great weaknesses that already existed in the auto industry. He also said that he considers it his obligation to make sure that any taxpayer dollars that are in place to support the auto industry are aimed not at short-term fixes that continue these companies as wards of the state, but rather institutes the kind of restructuring that allows them to be strongly competitive in the future.

Getting back to the Chrysler bankruptcy scenario Obama mentioned that it was the prudent and appropriate thing for Chrysler  to engage in the filings, because they had to prepare for possible contingencies. It’s not yet clear that they’re going to have to use them. The fact that the major debt-holders appear ready to make concessions means that even if they ended up having to go through some sort of bankruptcy, it would be a very quick type of bankruptcy. They would then be able to continue operating and emerge on the other side, in a much stronger position.

The president reiterated that his goal was to make sure that there is  a strong, viable, competitive auto industry in place, and for that to happen some tough choices are being made. He noted that there will be significant hardships involved, particularly for the workers and the families in these communities.

One of the questions asked to the president, at the news conference, referred to the fact that he is currently the chief shareholder of a couple of very large mortgage giants, and about to become the chief shareholder of a car company, probably two. The questioner asked the president what kind of shareholder will he be, and what is the government’s role as the keeper of public trusts and bonds in companies that will hopefully revert eventually to public companies.

Obama answered by saying that our first role should be “shareholders that are looking to get out,” and he further stated that “he did not want to run auto companies, mortgage companies or banks.” He reminded that he has two wars to run already and more than enough to do, and the sooner we can give up ownership of those companies the better off we’re gonna be. Good news to hear!