In a not-wholly surprising move, America’s ailing automaker Chrysler has filed for bankruptcy. The deadline for coming up with a viable plan for survivor or else be forced to pay back the government was nearing, and Chrysler had failed to negotiate a deal with creditors with the Obama Treasury Department acting as a mediator.

Private creditors holding billions in Chrysler debt refused to agree to trade the debt for equity at the offered returns, they figures they would get more in a bankruptcy court.

Chrysler was left with no option but a surgical bankruptcy that the Obama administration expects to be over in a 4 to 8 weeks. The end result of that bankruptcy, as is hoped by Chrysler and the government, will be a more efficient car company with a leaner and more competitive line-up.

That is where Italian car company Fiat comes in. Fiat itself is the product of a successful turnaround. The company has pioneered energy-efficient engines and has been pursuing a merger with Chrysler for months. Fiat will immediately acquire a 20% stake in Chrysler after it emerges from bankruptcy, and Fiat will also take over management.

What Fiat will bring is upgrading Chrysler’s cars with Fiat efficient engines, repackage Fiats as Chrysler for the American market, merge production into an efficient economy-of-scale, and Fiat’s experienced managers will run a great deal of the company.

Fiat is not putting up any of its own cash for the deal, the government is instead paying the costs of the merger.

Fiat’s involvement most likely cannot do any harm, but it is still no certainty that after reconstruction Chrysler will still be viable. American’s may have little apatite for Fiat’s Europeanesque cars and in a more competitive market Chrysler may still lack the product line up to continue to compete.