Washington  - Struggling US carmaker Chrysler LLC and Italian maker Fiat Motor SA said Monday they had reached a deal in principle on a new partnership, less than two hours after the US government said the merger was the only way for Chrysler to keep its emergency loans.

Chrysler chief executive Bob Nardelli, announcing the agreement, said the alliance would help the US carmaker preserve jobs and build more fuel-efficient cars.

"Chrysler has consistently said that the alliance with Fiat enhances its business model (and) expands its global competitiveness," Nardelli said in his statement.

It was unclear if there was a final agreement in place, or whether some details remained to be thrashed out between the two companies.

US President Barack Obama earlier Monday, in an ultimatum to the US car industry, declared that Chrysler would not be able to survive the current recession without a partner. He gave Chrysler 30 days to reach a deal with Fiat and show that it was on a path toward profitability.

Separately, General Motors Corp was given 60 days to complete its own restructuring efforts and was forced to replace its chief executive Rick Wagoner.

Under the deal, Fiat will take a minority stake in Chrysler, transfer green technologies and build some of its models for sale in the United States.

Chrysler has already received 4 billion dollars in emergency government loans and has asked for 6 billion dollars more. Obama said the additional funds could be granted after the 30 days if Chrysler had made progress in restructuring and shown it had a "sound agreement" in place with Fiat.

"While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the administration ... to secure the support of necessary stakeholders," Nardelli said.

Obama praised Fiat's "impressive turnaround" over the past few years from a beleaguered carmaker into a leading European manufacturer.

"Chrysler needs a partner to remain viable," Obama said.

Fiat chief executive Sergio Marchionne said he wished to thank Obama "for the kind words" on Fiat's turnaround and "for his encouragement to finalize a sound alliance between Chrysler and Fiat."

In a statement released by Fiat at its Turin headquarters, Marchionne said he was "firmly convinced that Fiat's environmentally conscious technologies and small and medium car platforms will play a key role in re-establishing a close rapport for the Chrysler brands with the American consumer."

The alliance would "also help preserve American jobs, significantly accelerate Chrysler's efforts to produce fuel efficient vehicles, and lead to a more rapid repayment of US taxpayer dollars," Marchionne said. (dpa)