Swift solution seen for Chrysler

The bankruptcy case, envisioned as a swift, "surgical" process, was filed in US Bankruptcy Court in New York. It marks the first time a major American car company has tried to restructure under bankruptcy protection since Studebaker in 1933.

"I have every confidence that Chrysler will emerge from this process stronger and more competitive," President Obama said.

He emphasized the speed with which the administration expects the process to be completed, saying it would be "quick, official, and controlled" and that the lives of those who work at Chrysler or live in communities where the company has operations would not be disrupted.

Obama said the partnership with Fiat "will give Chrysler not only a chance to survive but to thrive in the global auto industry." He said it was made possibly by the series of sacrifices by Chrysler stakeholders, such as the United Automobile Workers union, and said more sacrifices were in store.

But the president was pointedly critical of investment funds that rejected the government's settlement offer, saying they hoped to benefit from the sacrifices of others while making none of their own.

On CNBC, Chrysler's chief executive, Robert L. Nardelli, said he would leave Chrysler after it emerges from bankruptcy protection. He said Chrysler would be run by a new nine-member board, including three representatives from Fiat. The board will select a new chief executive. Nardelli said the government did not ask him to leave.

The bankruptcy filing could serve as a preview of what a filing by GM might look like. GM, which like Chrysler received federal assistance last year, faces a June 1 deadline for its own restructuring.

A senior White House official said the government would provide debtor-in-possession financing in a range of $3 billion to $3.5 billion, so the company can continue to operate normally.

Once Chrysler restructures, the company would receive $4.5 billion in financing to restart its operations, for total US government support through the bankruptcy process and afterwards of up to $8 billion.

That is $2 billion more than Obama initially said the company would receive if it successfully reached a deal with Fiat.

Chrysler has already received $4.5 billion from the government, under a bailout plan put into effect by the Bush administration in late December, after Congress rejected legislation that would have provided federal aid.

The Canadian government also is expected to provide $1 for every $3 in American support, the official said, meaning Chrysler could receive another $2.6 billion. A separate bankruptcy proceeding is anticipated in Canada, where court oversight may be tighter and creditors, notably dealers, may have more clout.

Government officials estimated that the bankruptcy case in New York could be as short as 30 to 60 days.

On Wednesday, union members approved contract changes with Chrysler that will mean pay and benefit cuts, and their contract is expected to remain in effect during the bankruptcy.

But Chrysler and the Treasury were unable to reach agreements with all the holders of $6.9 billion in company bonds. A number of investment funds balked at a government offer to pay $2.25 billion in cash for the debt, an offer that was sweetened after four major banks agreed to an earlier offer of $2 billion.

White House officials said the failure to reach agreement with lenders was the reason why Obama decided Chrysler should go through the bankruptcy process.