Chrysler-Fiat pact to form world's 6th largest automaker

US President Barack Obama today announced that troubled carmaker Chrysler will partner Italian giant Fiat to create the sixth largest global automaker and would head into bankruptcy with a government aid of upto $8 billion.       

The latest move is part of efforts to give a new lease of life to Chrysler, which has been a beacon of the US auto industry and a source of pride of generation of Americans.       

Obama said Chrysler has formed partnership with Fiat, creating the sixth largest global automaker and the alliance has a strong chance of success.       

"It's a partnership that will save more than 30,000 jobs at Chrysler and tens of thousands of jobs at suppliers, dealers, and other businesses that rely on this company. It's a partnership that the federal government will support by making additional loans," Obama said.       

Under the plan, the US government would provide approximately $3.3 billion in financing to support Chrysler through bankruptcy proceeding and upon closing is prepared to give about $4.7 billion to New Chrysler, in the form of a term loan, he said.       

The alliance will retain Chrysler's existing factory footprint and continue producing Chrysler cars in US factories while Fiat would contribute billions of dollars in advanced technology and intellectual property, offering Chrysler access to a global distribution network.In addition to this, several major financial institutions, led by JP Morgan, have agreed to reduce their debt to less than one-third of its face value to help free Chrysler from its crushing obligations.       

The German automaker Daimler, has agreed to give up its stake in Chrysler and contribute to the company's pension plan, further easing Chrysler's financial burden, Obama said.       

Obama also announced his decision to support Chrysler's plans to use bankruptcy laws to clear away its remaining obligations so the company can get back on its feet and on to a path of success.       

"I have every confidence that Chrysler will emerge from this process stronger and more competitive," he said.       

Dwelling out the reasons for the downfall of this auto company, Obama said: "For too long, Chrysler moved too slowly to adapt to the future, designing and building cars that were less popular, less reliable and less fuel efficient than foreign competitors. That's part of what has brought us to a point where they sought taxpayer assistance."