Chrysler LLC filed for bankruptcy on Thursday and announced an industry-changing deal with Fiat, after being pummeled by sliding auto sales and unable to reach agreement on restructuring its debt Despite weeks of intense negotiations, Chrysler failed to gain full support from its lenders to avoid the first-ever bankruptcy filing by a major US automaker. The move was hailed by President Barack Obama as a critical step in saving 30,000 jobs at Chrysler, majority-owned by Cerberus Capital Group, and hundreds of thousands more jobs at affiliated suppliers and dealers At the same time, Chrysler entered an expected alliance with Fiat SpA, in which the Italian carmaker was given an initial stake of 20 percent The deal will allow Fiat to own up to 35 percent as it makes investments in US operations and small-car technology for Chrysler. Over time, Fiat could eventually own 51 percent after Chrysler has repaid its loans to the US Treasury. In Ottawa, meanwhile, the Canadian government said Thursday it is allocating 2.4 billion US dollars to US auto giant Chrysler to help its restructuring process as it files for bankruptcy. “Thanks to our joint efforts, there is now a road ahead to a stronger Chrysler and a stronger industry in the future on both sides of the border,” said Canadian Prime Minister Stephen Harper in a statement. The funds being put up by the Canadian government and the province of Ontario would add to the $8 billion being made available to Chrysler by the Obama administration. Harper said Canadian support would ensure 20 percent of Chrysler's production would remain in Canada, but warned that did not mean there would not be any job losses. Canada and Ontario will hold two percent of the restructured company, and Ottawa will also get to appoint one of the nine administrators which will help oversee Chrysler, which filed for Chapter 11 bankruptcy Thursday. Chrysler has struggled in recent years to compete, hurt by its near total reliance on the US market, poor quality and a truck and SUV-dominated vehicle line-up with the lowest combined fuel economy of any major automaker Founded in 1925 by Walter P. Chrysler, three years later the company laid the cornerstone for the Chrysler Building, briefly the world's tallest building and still a landmark on the Manhattan skyline. The Chapter 11 filing, in US Bankruptcy Court in Manhattan, has implications for the entire industry - including Chrysler's rivals and suppliers. As part of the filing, the US government will provide up to $3.5 billion in debtor-in-possession (DIP) financing and up to $4.5 billion in exit financing. Obama said he hopes the entire process will take only 30 to 60 days. Some of Chrysler's 3,600 US dealers are expected to close, and Chrysler Financial will stop providing loans for new cars and trucks. Instead, GM Corp's financing arm, GMAC, will provide loans to Chrysler dealers and customers.
