Two Obama administration officials say Chrysler will file for bankruptcy protection after talks broke down with a small group of the company's creditors.
The officials spoke on condition of anonymity because the filing plan has not been formally announced.
The government had long hoped to stave off bankruptcy for Chrysler, but negotiations with hedge funds that hold its outstanding debt crumbled overnight.
Bankruptcy doesn't mean the nation's third largest automaker will shut down. And Chrysler is expected to sign a partnership with the Italian company Fiat as early as today as part of its restructuring plan.
President Barack Obama is expected to discuss the nation's auto sector at noon.