Chrysler LLC will file for chapter 11 bankruptcy after the storied automaker failed to convince its lenders to agree to a debt-reduction plan. President Barack Obama said the restructuring of Chrysler LLC will go forward even though a handful of hedge funds have refused to accept the Treasury Department's offer to cut the automaker's debt.

Simultaneously, a deal has been reached on the long-speculate plans to combine the company with Fiat to allow Chrysler to stay in business.

According to a report in The Wall Street Journal, the administration's auto task force tried to get all 46 of Chrysler's secured lenders to agree to a debt-reduction deal until talks broke down.

The newspaper reported an administration official saying, "After a month of tireless negotiations, the administration went into yesterday afternoon with the full support of Chrysler's key stakeholders, including the UAW and the largest creditors. That support remains."

Some of the largest banks agreed to take $2 billion in cash in exchange for giving up $6.9 billion in secured debt. The auto task force increased the offer to $2.25 billion, but a few of the creditors rejected it.

Administration officials, who have been braced for a Chrysler bankruptcy filing for weeks, believe
the company will complete the process quickly, perhaps in few weeks.

Chrysler's pending bankruptcy is a watershed moment for the 85-year-old automaker that popularized the minivan. It rebounded from a financial crisis in the late 1970s, but Chrysler's fortunes have faded since its breakup with Daimler AG two years ago.

Chrysler's U.S. sales during the first three months of this year were down 46 percent from a year ago. Last year, Chrysler had a 30 percent decline in sales, the worst in the auto industry.

Chrysler has about 39,000 U.S. employees, and is currently just ahead of Honda in fourth position in U.S. sales.

The company also has about 3,300 dealers with a combined total of 140,000 employees. Chrysler also has 65,000 U.S. retirees with pension and healthcare benefits.