Chrysler will file for bankruptcy after talks with a small group of creditors crumbled just a day before a government deadline for the automaker to come up with a restructuring plan, U.S. President Barack Obama said Thursday.

The Obama administration said it had become clear that a holdout group wouldn’t budge on proposals to reduce Chrysler’s $6.9 billion US in secured debt — a needed step for Chrysler to restructure by the Thursday deadline.

Chrysler will file for Chapter 11 bankruptcy protection in New York, giving it time to galvanize a partnership with Italian car maker Fiat Group SpA. The government would provide $8 billion more to carry it through bankruptcy, said senior administration officials. The deals give Chrysler “a new lease on life,” Obama said.

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