Chrysler would file for Chapter 11 bankruptcy protection if it reached a deal with its lenders, allowing Fiat to pick from the existing operations as part of a plan agreed to in principle by the United Auto Workers union, the Wall Street Journal said, citing people familiar with the matter.

President Barack Obama's administration has told Chrysler it will make available up to six billion dollars in new financing if it can work out a deal by the end of the month that would give it a chance for survival.

The administration, which has already provided four billion dollars in loans, has given Chrysler until April 30 to sign a deal or have its bailout money cut off, which could lead to the company's collapse.

The Treasury Department, in the latest trade of offers on slashing the carmaker's debt, proposed Wednesday that the banks and other lenders accept 22 percent of the 6.9 billion dollars they are owed, plus a five percent stake in a reorganized Chrysler, the Journal reported.

But The New York Times said the negotiations have taken a turn, with the Treasury working up a deal with the union that would see pensions and retiree healthcare benefits protected should the company file for bankruptcy.

"It should surprise no one that the administration is planning on contingencies, but we remain focused on the goal and engaged with all stakeholders to bring Chrysler and Fiat to a working partnership," an administration official who asked not to be named told the Times.

Chrysler spokeswoman Lori McTavish was quoted as saying: "As we move forward in this process, we believe it's important to keep all options open."

If a deal with Chrysler's creditors comes up short, the automaker would go into liquidation, a process that could see its assets sold off to various buyers or shut down altogether, the Journal said, citing anonymous sources.

A Chrysler bankruptcy would signal a watershed in the decline of Detroit's Big Three automakers, which include General Motors and Ford, as they struggle to stay afloat amid the economic crisis with a steep plunge in car sales.

Such a move would send shockwaves throughout an industry which has already seen thousands of jobs slashed, and ripple out to the supply chain of parts manufacturers and car dealers.

Meanwhile Fiat reported a heavy first-quarter loss Thursday of 411 million euros (537 million dollars).

Fiat chief Sergio Marchionne said "we continue to make progress" in talks with Chrysler, in which the Italian giant would initially take a 20 percent stake which would rise to 35 percent and could eventually reach 51 percent.

But German magazine Der Spiegel reported that Fiat could take a majority stake in Opel, a German unit of rival troubled US auto giant GM, which faces a June 1 deadline to present a viable restructuring plan.