WASHINGTON -President Obama's decision to save Chrysler by pushing it into bankruptcy Thursday puts the company in risky, uncharted territory for a major U.S. automaker and could portend a similar outcome for General Motors Corp. as it races to meet its own government restructuring deadline.
The administration is betting Chrysler's future on its ability to emerge quickly from what can be a complex and unpredictable legal process. Obama also is tying the company's fate to Fiat, a foreign owner who may not fathom American car buyers.
The Chapter 11 filing in a New York court provides a high-stakes test of whether consumers will buy cars from a company in bankruptcy even if the government stands behind the warranties, as the president has promised to do.
Obama spoke about bankruptcy as an unfortunate but necessary step to giving Chrylser "a new lease on life." But he sought political cover by blaming the move on some hedge funds and investment firms that would not agree to sharply reduce what the automaker owes them.
"I know that there are some who will insist that bankruptcy, even for these limited purposes, is a step that should not have been taken," Obama said. "But it was unsustainable to let enormous liabilities remain on Chrysler's books, and it was unacceptable to let a small group of speculators endanger Chrysler's future by refusing to sacrifice like everyone else."
Some of the debt-holders blasted back at Obama, saying they owed it to their shareholders to recover more of what they are owed. They complained that they were being treated worse than other creditors.
Obama's decision sends a sharp message to Chrysler's bigger rival, GM, and its stakeholders as their June 1 deadline for restructuring looms: He is not afraid to go to bankruptcy if needed.
Administration officials said they were confident that the Chrysler bankruptcy process, which is necessary to pave the way for an alliance with Italian automaker Fiat, would be completed in 30 to 60 days.
Some bankruptcy experts said that may be overly optimistic. The judge will have a host of competing constituencies to weigh, including dealers, parts suppliers, union workers and unhappy creditors. Dissident debtors are already firing shots at the plan.
"How long this lasts is anybody's guess, but 30 to 60 days is highly unlikely," said Douglas Bernstein, bankruptcy lawyer at Plunkett Cooney in Bloomfield Hills, Mich.
When Chrysler emerges from bankruptcy, the United Auto Workers will own 55 percent of the automaker and the U.S. government 8 percent. The Canadian and Ontario governments would share a 2 percent stake.
CEO Robert Nardelli announced he would step down when the bankruptcy is complete and take a post as an adviser with Cerberus Capital Management LP, which will give up its 80 percent ownership of Chrysler under the automaker's plan.
Any delays could prove very costly to Chrysler workers and the struggling economy. Chrysler said it would shut down most of its plants on Monday and keep them idle until the bankruptcy was completed. Some workers were already being sent home Thursday after some parts suppliers, spooked by the bankruptcy filing, stopped shipments to Chrysler - a sign that the bankruptcy process could prove more troublesome than some are hoping.
The Associated Press contributed to this article.
