Washington - Chrysler LLC hoped for a last-minute miracle to keep it out of bankruptcy as an ultimatum for the ailing US carmaker to restructure or lose the government's support was bearing down on the company Thursday.

As government-brokered negotiations between Chrysler and nearly 50 creditors went into Wednesday night, President Barack Obama offered few details but suggested the last-ditch efforts had yielded some positive results.

"I am actually very hopeful, more hopeful than I was 30 days ago, that we can see a resolution that maintains a viable Chrysler auto company out there," Obama said in a White House press conference Wednesday.

Chrysler's larger creditors including JP Morgan Chase & Co and Citigroup Inc had tentatively agreed to an offer of 2 billion dollars in cash in exchange for wiping out 6.9 billion dollars in debt. But the firm was struggling to get smaller lenders on board even as it reportedly sweetened the deal to 2.25 billion dollars Wednesday night.

The last-minute talks are designed to pave the way for an alliance with Italian carmaker Fiat Spa, another key condition set out by the Obama administration if Chrysler is to survive.

"The details have not yet been finalized, so I don't know to jump the gun," Obama said of the possible merger. "But I am feeling more optimistic than I was about the possibilities of that getting done."

Obama last month set a Thursday deadline for Chrysler to prove its long-term viability or risk losing the 4.5 billion dollars it has received in emergency government loans. General Motors Corp, which has taken a 15.5-billion-dollar federal bail-out, was given until June 1 to restructure its own operations.

US carmakers have suffered from a nearly 40-per-cent plunge in domestic car sales since October, as a deep recession has gripped the country. But their troubles have been compounded by a failure to streamline their operations over the last decade and match the greener models produced by foreign competitors.

Some US media reported Chrysler was already preparing to file for insolvency. Financial news agency Bloomberg said Obama would announce Thursday that Chrysler will file for Chapter 11 bankruptcy, citing "people familiar with the situation."

The bankruptcy could help solidify the merger with Fiat, which would take a 20-per-cent stake in Chrysler, while a union retiree health care trust fund would own 55 per cent and the government would control the rest, Bloomberg said.

The Wall Street Journal also reported that a bankruptcy filing was moving ahead, though Treasury Department officials were still hoping to persuade bondholders to accept a last-minute deal.

Chrysler spokeswoman Dianna Gutierrez dismissed the media reports as "a lot of speculation," and Obama said it was "not clear" yet that the company would have to resort to bankruptcy.

If Chrysler did have to go that route, Obama said it would be a "quick type of bankruptcy" that allows courts to help Chrysler restructure its debt and re-emerge "in a much stronger position."

Chrysler's chief executive Robert Nardelli, in a letter to employees obtained by German news agency dpa, expressed optimism earlier Wednesday that the company would survive without seeking bankruptcy, pointing to the deal with the union on labour agreements and the willingness of the big creditors to accept the debt offer.

"I'm encouraged by this progress and I want you to know I deeply appreciate the sacrifices made by so many constituents to help us reach the restructuring targets established by the government," he said.