President Obama announced this afternoon that Chrysler will seekbankruptcy and enter an alliance with Fiat.

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The American government will support Chrysler through thebankruptcy process and afterwards in a total of up to $8 billion.It is also expected that the Canadian government will provide $1for every $3 in American support.

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In the Fiat agreement, Fiat will provide technical operationsand build at least one vehicle model in a Chrysler plant.

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The new board to be appointed to run the third largest Americanauto company is expected to include representatives from bothChrysler and Fiat and the United Automobile Workers Union. Chryslerchief executive Robert L. Nardelli is expected to leave thecompany.

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The bankruptcy news came after Chrysler and the Treasury wereunable to reach agreements with all the holders of the $6.9 billionin company bonds. The government offered to pay $2.25 billion incash for the debt.

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As a result, 3,600 Chrysler dealers in the U.S. are expected toclose, and Chrysler Financial, the automakers lending arm, willstop providing loans for new Chrysler vehicles. GMAC will take overlending to Chrysler dealers.

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