The US car industry has been hit hard by the global economic meltdown

The court rejected a request on Tuesday to delay the sale to the group led by Fiat, a union-aligned trust and the US and Canadian governments.

Chrysler entered bankruptcy proceedings in April after it struggled with a slump in sales amid a US recession and global financial crisis.

The Chrysler case has also been widely regarded as setting a precedent for General Motors, which also is using a similar quick-sale strategy in its bankruptcy proceedings.

The US government, which pumped billions of taxpayer dollars into the firm while it attempted to negotiate the deal with Fiat, said it welcomed the deal.

"We are delighted that the Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker," a White House official said on Tuesday.

Job loss fears

Opponents of the deal included Indiana pension funds, consumer groups and individuals with product-related legal actions.

The pension funds argued the Chrysler sale unlawfully rewarded unsecured creditors ahead of secured lenders, and that the US treasury department overstepped its powers by using bailout funds for Chrysler when congress intended the money for banks.

Chrysler and the Obama administration had urged the supreme court to allow the sale to go ahead and said a long delay could result in Chrysler's liquidation and the loss of more than 38,000 jobs.

Earlier on Tuesday, a bankruptcy court had also approved Chrysler's closure of 789 dealerships, a move which one estimate says could also result in the loss of 38,000 jobs.

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