* 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. [ID: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 FIA.MI, 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. [ID:nN29360521]
The Chapter 11 filing, in U.S. Bankruptcy Court in Manhattan, has implications for the entire industry — including Chrysler’s rivals and suppliers. [ID: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. [ID: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 (GM.N) financing arm, GMAC, will provide loans to Chrysler dealers and customers.