LANSING – Yet another new day of reckoning hit Michigan’s economy on Thursday as Chrysler Corporation announced it would be forced to file for federal Chapter 11 bankruptcy protection as it was unable to reach agreement with bondholders on a negotiated arrangement. But officials said the bigger story was that the automotive manufacturer was now in position for a dramatic rebirth with the agreement it had reached with Fiat S.p.A. and with virtually all its other stakeholders, unions and financers.

But officials were also angry that the company had been forced to file Chapter 11, something it succeeded in avoiding when it got government assistance in the late 1970s. And they worried about the short-term effect on the state’s revenues and economy by the company announcing it was shuttering its plants for two months.

Gov. Jennifer Granholm told reporters that bankruptcy was not “good for Michigan. Certainty is good for Michigan.” While she was disappointed that the company was forced to file for Chapter 11, she was pleased that the company had a structure to reform itself and she was hopeful that it would mean that the state could see new job growth in the future.

U.S. Sen. Carl Levin (D-Detroit) told reporters that, with the day’s announcement, the state and nation were witnessing “the beginning of a rebirth for Chrysler.”

The major news was not that the company had to file for bankruptcy, which Levin characterized as a “a minor rock on the road to this rebirth.” The elements were all together for the company to recoup itself, Levin said, and that was the main element of this “wonderful story.”

He said, “I hope the public will get the feel that this is a great day for the economy, a great day for America.”

But in talking with reporters, Granholm acknowledged there was risk to the announcement. It was absolutely critical, she said, that the bankruptcy filing in a New York City court be as short as possible to allow the company to move forward under its new structure.

She also acknowledged there was great risk that consumers will not buy the company’s cars during this period, but she said President Barack Obama helped deal with that by offering a government guarantee to back up vehicle warranties.

She was confident that, as the economic recession eased, a “pent-up demand for new cars” will help Chrysler and the state’s other auto companies, General Motors and Ford, gain sales as well.

She was angry, however, that the company was forced into bankruptcy because some hedge funds holding bonds refused to reach an agreement with the firm on a settlement.

In a symbolic move, the House approved two measures Thursday that call on the governor to divest any state money from three hedge funds said to have stalled on the deal that could have kept Chrysler from filing for bankruptcy.

HR 90* and HCR 20* call on the state to divest from Oppenheimer Funds, Perella Weinberg Partners’ Xerion Capital Fund and Stairway Cap Management, although a spokesperson for the Department of Treasury said the state’s retirement systems have no investments in these hedge funds.

More than 21,000 of the automaker’s 38,000 employees work in Michigan, but the resolutions call on other states with Chrysler operations to divest as well.

House Speaker Andy Dillon (D-Redford Twp.) said the hedge funds could have cut a deal like everyone else and avoided the bankruptcy filing.

Rep. Tim Melton (D-Auburn Hills), whose district includes Chrysler headquarters and who sponsored the resolution, said the bottom line is the three hedge funds put short-term interests above the goal of long-term viability for Chrysler.

“This is a sad day. I hope we come out of it and I hope Chrysler comes out of it,” he said.

But the more interesting new owner, he said, is the UAW retiree healthcare plan. “It’ll be a very different Chrysler,” he said.

Analysts with the Mackinac Center for Public Policy argued that the automaker would continue to struggle after the ownership plan is in place because it is politically-based and designed to provide jobs, not necessarily a healthy employer.

“Follow the money. The control has been transferred to the union, but it’s not clear that they deserve majority control of the company based on their investment in it,” said Center Senior Economist David Littman. “This majority control isn’t an attempt to be fair to creditors or create a profitable car company. Rather, it seems to be due to a political intervention by the Obama administration.”

“The word ‘profitable’ is all but absent from the president’s discussion of this,” said Center Labor Policy Director Paul Kersey. “The president seems to see this as a jobs program and neglects the fact that at some point, this company will need to build cars and sell them at a profit.”

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