WRAPUP 12-Chrysler files for bankruptcy; inks Fiat deal

* Automaker files for Chapter 11 at New York court
* US government to provide DIP financing
* GMAC assumes Chrysler Credit business
* CEO Nardelli to leave Chrysler after bankruptcy
* Ford and GM shares close higher

(Adds details on Chrysler's search for a partner before
striking deal with Fiat, 4th paragraph from bottom)
By Poornima Gupta and John Crawley
DETROIT/WASHINGTON, April 30 (Reuters) - 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 U.S. automaker. [nN30510731]
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 [CBS.UL], 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 U.S. operations and small-car technology
for Chrysler. Over time, Fiat could eventually own 51 percent
after Chrysler has repaid its loans to the U.S. Treasury.
Chrysler has struggled in recent years to compete, hurt by
its near total reliance on the U.S. 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. [nN29360521]
The Chapter 11 filing, in U.S. Bankruptcy Court in
Manhattan, has implications for the entire industry --
including Chrysler's rivals and suppliers. [nWEN8254]
As part of the filing, the U.S. 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. [nWEQ000942]
Some of Chrysler's 3,600 U.S. dealers are expected to
close, and Chrysler Financial will stop providing loans for new
cars and trucks. Instead, General Motors Corp's
financing arm, GMAC, will provide loans to Chrysler dealers and
customers.
((Click on
http://static.reuters.com/resources/media/editorial/20090430/chrysler%20filing.pdf to see the full filing))
The legal proceedings will be overseen by Judge Arthur
Gonzalez, the same jurist who oversaw the Enron and WorldCom
bankruptcies.
In addition to Fiat's ownership stake, U.S. officials
expect Chrysler to be 55 percent owned by the United Auto
Workers' healthcare trust fund while the U.S. and Canadian
governments hold a combined stake of 10 percent.
Chrysler has three manufacturing plants in Canada and had
to reach agreements with its unions there and the Canadian
government under the restructuring. The automaker is not filing
for bankruptcy in Canada, but the Canadian government, along
with the province of Ontario, said they will provide $2.42
billion in financing to help the company restructure.
[nN30537478]

FIGHTING WORDS
The bankruptcy signals that Obama is prepared to play
hardball with holdout lenders rather than knuckle under to
their demands and will likely set the tone for similar
discussions with bondholders of General Motors -- which is now
on the clock to restructure its operations by the end of May.
While Obama voiced his support for Chrysler and the deal
with Fiat, he was pointed in his criticism of the investors who
did not agree to this deal.
"I don't stand with them. I stand with Chrysler's employees
and their families and communities," the president said. "I
don't stand with those who held out when everybody else is
making sacrifices. That's why I'm supporting Chrysler's plans
to use our bankruptcy laws to clear away its remaining
obligations."
This is not the first major government action with
Chrysler. In 1980, U.S. President Jimmy Carter signed a bill
providing Chrysler with more than $1 billion in loan
guarantees.
"Bankruptcy is what they have been headed for in the past
several months," said Mirko Mikelic, portfolio manager at Fifth
Third Bank. "The biggest concern now is that the different
stakeholders will be able to make the tough decisions they need
to make." [nN30517237]
Chrysler Chief Executive Robert Nardelli will leave the
automaker following the emergence from bankruptcy. The U.S.
government will place six members on the new company's board
and Fiat will appoint three.
Shares of Chrysler's U.S. rivals reacted positively to the
news. GM shares ended 6.1 percent higher and Ford Motor Co
ended up 9.7 percent, both on the New York Stock
Exchange.

FIAT: A DONE DEAL
The bankruptcy filing did not stall the Fiat deal.
Chrysler has been seeking a rescue deal from the Italian
automaker while also trying to finalize its debt agreement.
"It's a partnership that will give Chrysler a chance not
only to survive, but to thrive in a global auto industry,"
Obama said. "Fiat has demonstrated that it can build the clean,
fuel-efficient cars that are the future of the industry."
In court documents on Thursday, Chrysler detailed its
lengthy search for a partner over the last year and a half,
including talks with General Motors and Nissan. Those talks did
not pan out and Chrysler eventually found its way to Fiat.
[nWEN8296]
The government's debt-restructuring talks have been
spearheaded by the Obama administration's autos task force and
former investment banker Steve Rattner.
In a bid to win over three fund firms that had spurned an
offer to accept $2 billion in cash in exchange for writing off
all of Chrysler's $6.9 billion in secured debt, U.S. officials
sweetened the terms by throwing in another $250 million, people
familiar with those discussions said. [nN29455157]
Chrysler's plight reflects a slump in demand facing a
global industry whose $2.6 trillion annual revenue is
equivalent to the GDP of France and which employs more than 9
million people.
(See also TAKE A LOOK-Chrysler files for bankruptcy protection
[nN30527352]
(Reporting by Poornima Gupta and John Crawley, additional
reporting by Kevin Krolicki, Soyoung Kim, David Bailey, Nick
Carey, Jui Chakravorty, Jeff Mason and Giselda Vagnoni; writing
by Jo Winterbottom and Patrick Fitzgibbons; Editing by Tim
Dobbyn and Andre Grenon)
((poornima.gupta@thomsonreuters.com; + 1 313 967-1904))
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Keywords: AUTOS/

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