Delayed deal

In a one-sentence order, Justice Ruth Bader Ginsburg said a bankruptcy judge's orders allowing the sale "are stayed pending further order" by her or by the Supreme Court.

Ginsburg issued her order shortly before a deadline set by a US appeals court in New York. The expiry of the appeals court order would have allowed Chrysler to proceed with its sale to the Fiat-led group, which also includes a union-aligned trust and the US and Canadian governments.

Analysts say it is unclear exactly what the next step might be, but many interpret the action as being aimed at winning judges more time to consider their response to three Indiana pension funds' attempts to block the deal.

The funds argue that the sale of Chrysler to Fiat is unconstitutional because it puts the rights of junior creditors ahead of the rights of senior lenders.

Obama warns of "grave consequences"

Chrysler declared bankruptcy on April 30, and US President Barack Obama insisted on a speedy process within 30 to 60 days. Chrysler has shut down assembly lines in the US and Canada until the outcome is clear.

Earlier on Monday, the Obama adminstration urged the Supreme Court to allow the sale, saying that blocking the deal would have "grave consequences."

Both Chrysler and the US government have warned that a long delay risked killing the deal and resulting in Chrysler's liquidation because Fiat is entitled to back out of the sale if it is not finalized by June 15.

Just after the order was issued, Fiat CEO Sergio Marchionne told Bloomberg news service that the Italian carmaker would "never" walk away from the deal.

Chrysler's speedy bankruptcy plan is also a key point of interest for General Motors, which has filed for creditor protection as part of a plan that offloads its German subsidiary Opel and gives the US government a majority stake in the new GM.

sje/afp/dpa/Reuters

Editor: Sonia Phalnikar