The old saying goes, when the USA Car Makers sneeze, the whole world catches a cold. Is this a bigger event than Swine flu?

Will they still keep making the Mafia Squad car? Possibly one of the most innovative cars from Chicago in some years! I certainly hope so. A Fiat Bambina with a Chrylser badge on it just is not the same thing somehow!

Chrysler, battered for the past two years by disappearing global auto sales and the credit crisis -- filed for bankruptcy overnight and announced an industry-changing deal with Fiat after talks to restructure its debt broke down.

Despite weeks of intense negotiations, Chrysler failed to gain the full support from its lenders to avoid the first-ever bankruptcy filing by a major US automaker.

This is how the financial structure will look like, according to the BBC over the weekend.

Fiat will take a 20% stake, with the possibility of it rising to 35% if performance targets are met. It could reach 51% by 2016 if Chrysler's government loans are fully repaid

• The Treasury will have an 8% stake, a union-run trust fund VEBA will take a 55% stake, and the governments of Canada and Ontario will gain a combined 2% stake

• Current owner Cerberus will forfeit its 80.1% stake

• Daimler will give up its remaining 19.9% stake in Chrysler

• Chrysler bondholders will receive $2bn (£1.35bn) in cash in exchange for forgiving their $6.9bn debt

The move was hailed by President Barack Obama as a critical step in saving 30,000 jobs at Chrysler, and hundreds of thousands more jobs at affiliated suppliers and dealers.

The Chapter 11 filing, in US Bankruptcy Court in Manhattan, sent shock waves through the entire industry -- including Chrysler's rivals and suppliers.

As part of the filing, the US government will provide up to US$3.5 billion in debtor-in-possession (DIP) financing and up to $4.5 billion in exit financing. Obama said he hopes the entire process will take only 30 to 60 days.

Some of Chrysler's 3,600 US dealers are expected to close, and Chrysler Financial will stop providing loans for new cars and trucks. Instead, GM's financing arm, GMAC, will provide loans to Chrysler dealers.

"Bankruptcy is what they have been headed for in the past several months," said Mirko Mikelic, portfolio manager at Fifth Third Bank. "The biggest concern now is that the different stakeholders will be able to make the tough decisions they need to make.

"It's a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry," Obama said. "Fiat has demonstrated that it can build the clean, fuel-efficient cars that are the future of the industry."

The debt-restructuring talks have been spearheaded by the Obama administration's autos task force and former investment banker Steve Rattner.

In a bid to win over three fund firms that had spurned an offer to accept $2 billion in cash in exchange for writing off all of Chrysler's $6.9 billion in secured debt, US officials sweetened the terms by throwing in another $250 million, people familiar with those discussions said.

Chrysler has been among the car industry's laggards, but its plight reflects a slump in demand facing an industry whose $2.6 trillion annual revenue is equivalent to the GDP of France and which employs more than 9 million people.

This could be one of the major steps towards recovery in the USA. No gain without pain, but looks like most workers will keep their jobs.Some heads will roll at the top but hey, who cares! On the ridiculously over-inflated incomes they used to enjoy, they won't be too worried I am sure.