US car giant Chrysler filed for bankruptcy protection today as it was announced that a rescue deal with Italian firm Fiat had been reached.
President Barack Obama said the partnership would give the US's third largest car manufacturer a chance "not only to survive but to thrive".
He also angrily hit out at a small group of hedge fund creditors who held out for an "unjustifiable" taxpayer bail-out for Chrysler, necessitating the move into Chapter 11 bankruptcy.
Chrysler will enter into Chapter 11 bankruptcy under the US code. The move will allow the firm to restructure without having to enter into liquidation.
As such it will be allowed to continue to operate as a going concern as it clears away its remaining obligations ahead of a formal tie-up with Fiat.
The move comes hours before a deadline set by the White House for Chrysler to come up with an agreement with Italian car-maker.
Mr Obama said the merger with Fiat would give an "icon" of the American automobile industry "a new lease of life".
As part of the deal, the federal government is to inject up to $6bn (€4.5bn) into the company in the form of loans.
However, "every dime" of taxpayers' money would be repaid before Fiat could take a majority ownership, Mr Obama said.
The Italian car-maker has agreed to transfer billions of dollars in technology to help the firm create fuel efficient cars.
Chrysler's reluctance to move with the times in this areas was cited by the president as part of the cause of its downfall.
The partnership was made possible by "unprecedented sacrifice" by major stakeholders, Mr Obama said. He noted employees' acceptance of wage cuts and benefits to help the firm survive.
He also praised large banks, led by JP Morgan, which agreed to reduce the level of debt owed to them to less than a third of face value in a bid to free Chrysler of its obligations.
However, he angrily denounced a small block of creditors who refused to do likewise, forcing Chrysler into bankruptcy protection.
He said: "A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bail- out.
"They were hoping that everyone else would have to make sacrifices and they would have to make none."
Mr Obama continued: "I do not stand with them. I stand with Chrysler's employees, their families and their communities. I stand with Chrysler's management, dealers and suppliers. I stand with the millions of America who own and want to buy Chrysler cars.
"I do not stand with those who held out when everyone else is making sacrifices."
Mr Obama said bankruptcy was a hard path, but added that it was unsustainable for enormous liabilities to remain on Chrysler books and unacceptable to let "a small group of speculators endanger Chrysler's future by refusing to sacrifice like everyone else".
He said the move into bankruptcy protection was not a sign of weakness. Rather it was "one more step on a clearly charted path to revival".
He added that the bankruptcy period would be quick and he was "confident" that Chrysler would emerge stronger and more competitive.