Plan includes another $10.5 billion loan to Chrysler

Washington -- Chrysler filed for bankruptcy Thursday in New York in what government officials hope will be a 30- to 60-day stay -- and along with the Canadian government will loan the company $10.5 billion.

The plan, outlined by administration officials and announced by President Barack Obama in a noon appearance at the White House, also includes additional government support to GMAC, the General Motors financing arm that will now provide financing to Chrysler buyers instead of Chrysler Financial.

The administration said workers will continue to be paid and provided with benefits, and the company's pension plan will be preserved.

The U.S. Treasury will provide a total of $8.1 billion -- both in debtor-in-possession financing to allow Chrysler to operate under bankruptcy and exit financing to operate out of bankruptcy -- and the Canadian government will provide $2.4 billion, officials said.

The Chapter 11 bankruptcy filing includes Chrysler's 50 largest creditors -- including Johnson Controls, which is owed $50.3 million. Its largest creditor is Toledo-based Ohio Module Manufacturing Co., which is owed $70.3 million, and its second-largest is Troy-based BBDO Detroit Inc., which is owed $58 million.

The Treasury will provide Chrysler with $4.7 billion in financing to help the restructured company emerge from bankruptcy. Chrysler will have a new board of directors and the government will be able to choose up to four directors; the Canadian government has the right to select one board member.

While Chrysler dealers and some of the company's lenders -- holdouts in a final, failed round of negotiations to avert bankruptcy -- could try to derail the process, administration officials said they are confident a restructured company can emerge quickly.

"If a few lenders want to go into court and raise their hand, they're going to be facing more than half of the other lenders as well as more than 70 percent of the capital saying, 'No, no, no, we want to do this deal,' " said an administration source who spoke on condition of anonymity. "And our judgment is that no judge is going to override that kind of support."

The official said Chrysler would seek a so-called "363 sale," named after a section of the federal bankruptcy code. That section allows companies to essentially split off and sell their valuable assets in bankruptcy, unburdened by the debts and other obligations of the old company.

The deal outlined Thursday also sets incentives that encourage Fiat, Chrysler's new alliance partner, to build cars and engines in the United States. Fiat, which initially gets a 35 percent stake in the new company, can earn additional 5 percent stakes if it produces a car at a Chrysler facility that gets up to 40 mpg, builds fuel-efficient engines at U.S. plants, and gives Chrysler access to its extensive global distribution network.

The filing was signed by Chrysler's lead bankruptcy attorney Corinne Ball, of Jones Day. The case was assigned to U.S. Bankruptcy Judge Arthur Gonzales, who has handled major cases like Enron's bankruptcy, along with MCI Worldcom.

A new nine-member board of directors will run Chrysler, including four appointees from the U.S. government, three from Fiat and one from the UAW-run health care trust fund and one from the Canadian government.

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