Chrysler To file For Bankruptcy

NEW YORK (CNN) -- Chrysler LLC is going to file for bankruptcy, an administration official confirmed to CNN Thursday.

The filing comes after some of the company's smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owed them.

Chrysler officials had no comment on the bankruptcy report. The company faces a Thursday deadline from the Treasury Department to reach deals with creditors who had loaned the company about $7 billion.

But the filing will not mean the halt of operations or liquidation for the troubled 85-year old automaker. Instead, the administration expects to use the bankruptcy process to join Chrysler with Italian automaker Fiat.

In addition, the United Auto Workers union announced late Wednesday night that its membership at Chrysler had overwhelmingly ratified a concession contract reached between the company and union leadership on Sunday night.

President Obama said during a press conference Wednesday night that he was more confident than he had been 30 days ago that Chrysler would be able to emerge from the process as a healthy, competitive company. He is set to comment on the state of the auto industry at noon on Thursday.

The administration said Wednesday evening that talks with the smaller lenders broke down when they refused to meet a deadline set by the Treasury Department to accept pennies on the dollars they had loaned the company.

"After a month of tireless negotiations, the Administration went into yesterday afternoon with the full support of Chrysler's key stakeholders, including the [United Auto Workers union] and the largest creditors. That support remains," said an administration official.
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