Ottawa and Ontario will kick in $3.8 billion to help Chrysler restructure amid a bankruptcy deal that will see the once-mighty company team up with Italian automaker Fiat.

In return, the governments will get a 2 per cent stake in Chrysler and a promise of repayment within eight years -- complete with interest.

While Prime Minister Stephen Harper conceded that using taxpayer money to salvage Chrysler isn't an ideal scenario, he said it's the best possible outcome.

"This is not a perfect decision but far better than the alternatives and it will ensure a viable Chrysler and ultimately be part of a viable auto sector coming out of the recession, which Canada must have," Harper said in Toronto Thursday.

According to Ontario Premier Dalton McGuinty, the province will contribute $1.25 billion.

Ottawa will submit about $2.5 billion.

"This will give our two governments a two per cent share of the company, it will give us a seat at the boardroom table, and it will give Chrysler's plants in Windsor and Brampton a new lease on life," McGuinty said. "Those plants will stay open."

Washington is also pumping billions into the automaker and will get eight per cent of the company.

Earlier in the day, Harper and U.S. President Barack Obama issued a joint statement acknowledging "that the automotive industries in Canada and the United States are tightly linked, with major automobile manufacturers and supplier operating on both sides of the border in a completely integrated way."

And they thanked "the considerable contributions and sacrifices of company management, the United Auto Workers and Canadian Auto Workers, and major lenders, and a successful partnership with Fiat SpA," which made the financing deal possible.

The statement indicates that "the historic shares of auto production in both countries for Chrysler" will be maintained under the restructuring agreement.

A new nine-member Chrysler LLC board will include four independent directors appointed by the U.S., as well as one appointed by Canada.

Meanwhile, Fiat will appoint three directors and the United Auto Workers in the U.S. will appoint one.

Ken Lewenza, president of the Canadian Auto Workers, said his union was forced to make big sacrifices in order for the deal to go through.

Lewenza said the deal will maintain around 23 per cent of Chrysler's "manufacturing footprint" in Canada, ensure future investment to keep Canadian plants vital and provide research and innovation funding to "enhance" productivity.

"We may even be able to raise what we have in Canada in terms of our production volumes," he said, referring to Ontario plants in Brampton, Windsor and Etobicoke.

Despite new ownership, Lewenza said that workers will continue to be productive.

Bankruptcy filing

News of the financing deal came on the same day that Chrysler filed for bankruptcy protection in the U.S.

Like its peers, Chrysler has suffered greatly in a recession that has made it harder for buyers to borrow money and killed demand for new vehicles. The automaker was forced to seek bankruptcy protection after the U.S. government could not reach a deal with its creditors.

Canada's prime minister defended the choice to aid Chrysler as "the best way forward for the Canadian economy."

"Given the options we have, this is the best option, this is the best package," Harper said.

McGuinty added that the provincial auto industry was "too important to too many Ontario families" to let one of its major automakers fail.

"Together we worked hard to build up our industry and our jobs and we won't give that up," he said. "It's too important for Ontario's economy, just as a strong auto sector is absolutely vital for our Canadian economy."

Ontario backlash

At Queen's Park, debate broke out over the financing deal involving Ontario money and the soon-to-be-restructured car company that employs about 9,400 people in Windsor, Toronto and Brampton.

Ontario NDP Leader Andrea Horwath said the province could not have much control over the deal because it owned so little of Chrysler.

"This investment is supposed to keep jobs in Ontario and keep our economy healthy," she said.

"But the premier cannot enforce those terms because he only has one-fiftieth of a stake at the table. It's a two per cent stake in Chrysler: Is that all the negotiating power that Ontarians can expect for their multi-billion investment?"

Ontario's minister of economic development, Michael Bryant, said the investment was not ideal, but also not a permanent arrangement.

The Ontario government ultimately wants Chrysler to "get back to the business of creating cars" that consumers want, Bryant said.

Tony Faria, co-director of the automotive research centre at the University of Windsor, said he believes Chrysler has a good shot at coming back from bankruptcy -- but it won't be easy.

Faria said Chrysler would be best to develop smaller cars, perhaps based on Fiat technology, which are both fuel efficient and popular, as gas prices rise to previous levels.

"All of these things are going to have to come into play," he said during an interview with CTV Newsnet from Windsor, Ont., on Thursday afternoon.

"But if those things happen, Chrysler can be a very successful company once again."

With files from The Canadian Press and a report from CTV Toronto's Paul Bliss