Feb. 17 (Bloomberg) -- Chrysler LLC, the third-largest U.S. automaker, said it would need $2 billion more in federal aid to successfully restructure, pushing its total request to $9 billion.

Chrysler also said it needs to eliminate an additional 3,000 jobs after shedding 32,000 through the end of last year. The company had requested $7 billion before today, and had received $4 billion so far.

The Chrysler proposal came before one due later today from General Motors Corp., which has received loan pledges for $13.4 billion. A final plan due March 31 will determine whether government backing continues or whether GM and Chrysler may need to be forced into bankruptcy to overhaul their operations.

The industry got a boost when the United Auto Workers said it reached tentative agreements with GM, Chrysler and Ford Motor Co. to amend U.S. labor contracts to help the companies survive.

President Barack Obama’s chief spokesman said the administration can’t rule out a restructuring through bankruptcy for GM and Chrysler, while adding the industry is “tremendously important” to the economy.

White House press secretary Robert Gibbs, speaking before GM and Chrysler submitted their progress reports, said the administration won’t “prejudge” the next steps.

“I wouldn’t preclude policy choices, particularly since we haven’t seen details,” Gibbs told reporters traveling with the president to Colorado. The auto companies “represent a huge part of our manufacturing base, and to have a strong and viable auto industry is tremendously important for the future.”

Accord With Fiat

Chrysler has agreed in principle to trade 35 percent of its equity to Turin, Italy-based Fiat SpA for small-car technology and access to global markets. The accord depends on Chrysler getting additional federal aid and approval by the U.S. government.

Sales last year at Chrysler tumbled 30 percent, the most of any major automaker. The company relies more than competitors on pickup trucks, sport-utility vehicles and vans, which lost sales last year as gasoline prices rose to a record high and consumers shifted to more fuel-efficient cars.

GM fell 32 cents, or 13 percent, to $2.18 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has dropped 92 percent in the past 12 months. Chrysler is controlled by Cerberus Capital Management LP.

The automakers must show progress in getting creditors and the UAW to accept equity in place of billions of dollars in scheduled cash payments. GM and Chrysler must also ensure that future models will meet environmental rules that may require $100 billion in new technology.

‘A Lot at Risk’

“Everyone has a lot at risk,” said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. “If the UAW doesn’t provide concessions, and the union forces GM’s hand and they go into bankruptcy, it will be the end of the UAW as we know it.”

The progress report will be evaluated by Treasury Secretary Tim Geithner, White House economic adviser Lawrence Summers and a new automotive task force. The Obama administration created the panel rather than use a single “car czar” to supervise the federal loans, which were authorized by then-President George W. Bush’s Treasury Department Dec. 19.

GM is to receive $4 billion today, as scheduled, said a person familiar with the matter. The administration may give more money to the automakers if they demonstrate they can repay the loans, Geithner said in a Feb. 10 CNBC interview.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan, said before today’s submissions that the GM and Chrysler reports probably would “lead into kind of a 4- way discussion between the government, the companies, the union and the bondholders.”

Loan Terms

The terms of the Dec. 19 loan agreements from the U.S. Treasury require GM and Auburn Hills, Michigan-based Chrysler to persuade the UAW to accept equity instead of cash for half of next year’s scheduled payments into a union-run retiree health- care fund. The UAW walked out on GM talks Feb. 13 in a dispute over the proposal.

UAW President Ron Gettelfinger has said he’s willing to make additional concessions to help the automakers avoid bankruptcy if auto executives, debt holders and others also sacrifice.

GM said last week it will fire 10,000 of 73,000 salaried workers globally and cut the pay of many who remain. The automaker also is seeking to shed 1,700 of its 6,400 auto dealers. Chrysler is also seeking savings from dealers and suppliers.

In separate talks, GM and its bondholders are working to craft a debt exchange that gives investors who participate greater security and more seniority so that enough take part, a person with direct knowledge of the talks said this weekend.

GM needs to cut two-thirds of its $27.5 billion in unsecured public debt to $9.2 billion as required by the U.S. government.

To contact the reporters on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Keith Naughton in Southfield, Michigan at Or Knaughton3@bloomberg.net

Last Updated: February 17, 2009 17:14 EST