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

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

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

The new board to be appointed to run the third largest American auto company is expected to include representatives from both Chrysler and Fiat and the United Automobile Workers Union. Chrysler chief executive Robert L. Nardelli is expected to leave the company.

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

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