Chrysler chief executive Robert Nardelli told a US bankruptcy judge on Thursday that only a proposed tie-up with Fiat can save the failed US auto giant from calamitous liquidation.
Nardelli, testifying in US Bankruptcy Court, where Chrysler is seeking approval for a plan to resurrect the company in an alliance with Italy's Fiat, said the US government-crafted plan was the one way out.
"It got down to; either file for bankruptcy... or liquidate the company. I can't imagine using business judgment that (would result in) liquidating a company and impacting some 60,000 employees," Nardelli said.
"It would have been just a cataclysmic impact on the industry and on the economy."
Nardelli was testifying on a second day of hearings, countering arguments from some creditors, car dealers and pension holders who accuse the government of circumventing their legal rights.
The Chrysler CEO issued an optimistic prognosis, saying a finalized deal with Fiat was possible as soon as Friday. He said US regulatory approval for the partnership was "well on its way" and that "hopefully we'll have it done from tomorrow."
Judge Arthur Gonzalez was widely expected to rule in favor of the huge bankruptcy deal.
But a bitter rearguard action from opponents meant marathon court sessions on Wednesday and Thursday, with more likely Friday before Gonzalez would be able to rule.
The once mighty US auto industry is reeling, prompting massive intervention by President Barack Obama's administration to prevent total collapse and a new body blow to a national economy already in recession.
In addition to Chrysler, the government may also rescue General Motors with a plan could put as much as 72.5 percent of the country's biggest automaker under state ownership, according to documents filed by GM Thursday.
If Gonzalez approves Chrysler's bankruptcy, a new-look company could emerge within days, according to the government.
If not, Chrysler faces a grim future, with a worst-case scenario being Fiat abandoning the tie-up and the US automaker going into liquidation, with massive job losses.
Nardelli said that hard choices were forced on Chrysler when US financial markets went into a "death spiral" in 2008, drying up credit throughout the economy and bringing the auto industry to a halt.
Nardelli described "a financial meltdown in the ability to get liquidity."
"It's almost as if someone flipped the switch," he said.
However opponents to the Chrysler rescue say that smaller stakeholders have been trampled on in the government's rush to push through the bankruptcy.
A lawyer representing 789 Chrysler dealerships due to be shut down around the country, leading to thousands of job losses, questioned whether the harsh measure was necessary.
"What did you do to protect the 789 dealers?" the lawyer asked.
Nardelli responded that the sacrifice of those dealerships was part of a scheme to give Chrysler a new lease of life. "By keeping the business viable we saved 3,000 dealers," he said.
"We needed to downsize on the dealers so that the remaining dealers would be more profitable," he said.
"These are gut wrenching decisions that nobody enjoys."
The third-largest US automaker was forced to file for bankruptcy protection on April 30 and agreed to an alliance with Fiat that will initially give the Italian company a 20 percent stake.
In return, Fiat will allow access to its technology to enable the US carmaker to make the smaller, greener cars that are increasingly in demand.
The US Treasury has provided Chrysler with some nine billion dollars in emergency aid. Fiat must repay this money if it wants to take a majority stake in the Detroit firm.
In testimony on Wednesday, Fiat executive Alfredo Altavilla, an architect of the proposed partnership, warned: "if this agreement is not closed by June 15 we will need to reconsider our ability to close the transaction."