Chrysler, the third-largest car maker in the U.S., filed for bankruptcy and will stop production until it reaches an agreement with Italian carmaker Fiat to help reduce its $6.9 billion debt. President Obama said it was "not a sign of weakness," but "one more step on a clearly chartered path to Chrysler’s revival."

President Obama has rejected the restructuring plans submitted by GM and Chrysler. Both companies may enter bankruptcy forcing the federal government to back future warranties.

General Motors, Ford and Daimler Chrysler, the auto industry's "big three," asked Congress for a $25 billion "lifeline" to save them from collapsing.