By Soyoung Kim

Chrysler announced the planned alliance with Fiat earlier this week. The automaker, which received a $4 billion U.S. government loan to avert collapse and is seeking $3 billion more, has a short deadline to prove to U.S. lawmakers it can be viable.

"Fiat is not a done deal. We're going through due diligence, working through a lot of details," Chrysler's Jim Press said at a J.D. Power and Associates conference.

Chrysler, 80-percent owned by Cerberus Capital Management

, is talking to its creditors and the United Auto Workers union on the Fiat deal, which does not preclude alliances with other automakers.

Press said the deal had the potential to slash development costs for Chrysler by giving it access to Fiat's fuel-efficient small car technology.

"We have no expertise and don't have tens of billions of dollars to gain that expertise," Press said.

Press said the Fiat alliance would preserve jobs in the United States. He said the automaker also has been talking to a number of different potential partners.

The alliance with Chrysler would give the Italian automaker a sales foothold in the United States. Press said Fiat-brand cars could be in Chrysler showrooms within two years.

Nearly all of Chrysler's sales are generated in North America and its Chrysler, Dodge and Jeep lineup has been weighted toward larger SUVs and pickups. Those segments have fared the worst in the economic downturn.

The J.D. Power conference comes just ahead of the annual National Automobile Dealers Association convention where car makers meet with the thousands of dealers that make up the vast network that sell cars throughout the United States.

Press said Chrysler is well on its way to paring operations to fit demand, but dealership consolidation would be necessary. He also said Chrysler was not planning to eliminate brands.

The automaker has eliminated slow-selling models. Chrysler halted production of its Dodge Durango and Chrysler Aspen SUVs in December and has no plans to restart that output.

A year ago, Press told dealers Chrysler had the model and dealership network to support 4 million per year in U.S. sales, but had retail sales of about 1.5 million and needed to be sized to sell about 2.5 million vehicles.

U.S. auto sales fell 18 percent to about 13.2 million units in 2008 and most automakers expect a further decline in 2009. Chrysler's U.S. sales fell 30 percent in 2008 to about 1.45 million.

Chrysler's sales dropped even more sharply toward the end of the year as credit availability tightened, capped by a 53-percent drop in December.

(Reporting by Soyoung Kim; Editing by Tim Dobbyn)