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Chrysler to File for Bankruptcy, Enter Alliance With Fiat

Chrysler LLC will file for bankruptcy protection immediately and, as part of a restructuring that will take place under bankruptcy protection, will enter an alliance with Italian automaker Fiat, President Barack Obama announced today. "After consulting with my auto task force, I can report that the necessary steps have been taken to give one of America's most storied automakers, Chrysler, a new lease on life," Obama said. Obama also said that the federal government and the government of Canada will provide additional financing to the company to allow it to operate normally while the restructuring takes place; The New York Times reports that Canada will provide approximately $1 for every $3 in American support. The bankruptcy filing became a last resort for Chrysler when hedge funds that held some of the company's debt refused a deal with the Treasury Department. The Times also reports that Fiat will not put up any financing for the restructured company but will provide technology transfer and leadership; Chrysler's CEO Robert L. Nardelli is expected to resign from his position. The United Auto Workers union has agreed to significant concessions in exchange for a 55 percent stake in the new company; it is expected that this agreement will hold up in bankruptcy court. Administration officials say that no significant job cuts or plant closures are expected in the restructuring, but that some of the company's 3,600 dealers will close. Chrysler Financial will cease to provide financing for Chrysler vehicles and instead, GMAC Financing will take over lending to Chrysler dealers.

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