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Chrysler files Chapter 11 bankruptcy papers

November 15, 2010

Chrysler LLC filed for bankruptcy protection Thursday in federal court in New York, after some of the company’s smaller lenders refused a Treasury Department demand to reduce the amount of money the troubled automaker owes them.

But a deal was reached to combine the company with Fiat, which will allow Chrysler to stay in business, and Chrysler will continue to make cars and honor its warranties while under Chapter 11 protection.

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 a senior Obama administration official said that many of those closings will take place after the company emerges from bankruptcy.

Between them, the 3,300 dealerships employ about 140,000 people.

Members of the president’s special auto task force were unsure the company could be viable for the long term without the use of what has been called a "surgical bankruptcy," to be executed in as little as 60 days.

As the talks with Fiat and the lenders entered the final hours, members of the United Automobile Workers union approved a historic deal in which the union would take a 55 percent stake in Chrysler. The stake would finance half of a new trust to administer retiree health care costs.