Chrysler filed for Chapter 11 bankruptcy protection on Thursday after President Barack Obama criticised hedge funds for blocking an out-of-court restructuring of the US carmaker’s $6.9bn debt.

The Obama administration said the owner of Jeep and Dodge would emerge from a “surgical” bankruptcy process with more government aid and new shareholders, including Italy’s Fiat and the United Auto Workers union. Bob Nardelli, Chrysler chief executive, will step aside as part of the deal.