DETROIT/WASHINGTON, (Reuters) – Chrysler LLC filed  for bankruptcy yesterday and announced an industry-changing  deal with Fiat, after being pummeled by sliding auto sales and  unable to reach agreement on restructuring its debt.

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

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

At the same time, Chrysler entered an expected alliance  with Fiat SpA, in which the Italian carmaker was given an  initial stake of 20 percent.

The deal will allow Fiat to own up to 35 percent as it  makes investments in U.S. operations and small-car technology  for Chrysler. Over time, Fiat could eventually own 51 percent  after Chrysler has repaid its loans to the U.S. Treasury.

Chrysler has struggled in recent years to compete, hurt by  its near total reliance on the U.S. market, poor quality and a  truck and SUV-dominated vehicle line-up with the lowest  combined fuel economy of any major automaker.