Chrysler is one of the three troubled US carmakers
Chrysler has reached an outline cost-cutting deal with its main US union as it continues efforts to restructure the business before a key deadline.
The US government has told the carmaker it will be given a further $6bn (£4bn) of vital state loans if the restructuring is completed by 30 April.
Without the extra funds Chrysler may have to enter bankruptcy protection.
The government is also demanding that Chrysler refinances its debts and secures an alliance with Italy's Fiat.
Chrysler wants staff to accept pay cuts and shorter working hours.
While the United Auto Workers union has accepted a deal in principle, its 26,800 members at Chrysler still have to formally vote on the proposal, the exact details of which have not been released.
Chrysler secured a $4bn loan from the US government in January, and has since gained $500m more.
Fellow Big Three US car firm General Motors (GM) has also received multi-billion government loans. While Ford has yet to require any money, the government has agreed to give it financial support, should it be needed.
Chrysler, GM and Ford have all seen sales slump in their home market as the recession has intensified.