Chrysler files Chapter 11; deals to combine with Fiat

Chrysler LLC has filed for Chapter 11 bankruptcy, CNNMoney.com reported on Thursday. But a deal has been reached to combine the company with Fiat in order to allow Chrysler to stay in business.

The bankruptcy filing, which was made in federal court in New York, comes after some of Chrysler's smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owed them.

In remarks at the White House, President Obama said that the bankruptcy filing is not a failure for the company but "one more step on the path to Chrysler's revival."

The president harshly criticized the hedge funds and investment firm creditors that refused to go along with the deal accepted by larger lenders, saying that they had "decided to hold out for the prospect of an unjustified, taxpayer funded bailout."

Obama vowed the bankruptcy process would be quick, efficient and controlled. A senior administration official predicted it would be completed within 30 to 60 days.

There will be no immediate job cuts or plant closings due to the bankruptcy filing, according to the official. But Fiat will be examining the cost structure of Chrysler to find additional savings. Fiat has promised to use Chrysler's existing plants to build the small cars it now sells in Europe for the U.S. market.

An unspecified number of Chrysler's 3,300 dealerships which now sell the Chrysler, Dodge and Jeep brands will be closed under the bankruptcy, although the administration official said that many of those closings will take place after the company emerges from bankruptcy.

• CNNMoney.com: Chrysler files for bankruptcy