DETROIT - Chrysler LLC's proposed deal with Fiat SpA is worth up to $10 billion for the cash-strapped U.S. automaker and could preserve 5,000 North American manufacturing jobs, Chief Executive Bob Nardelli said on Monday.

We estimate the cash value of Fiat's contribution to be between $8 and $10 billion, considering the cost to develop these vehicles, platforms and powertrains from scratch, Nardelli said in an email to employees.

The value of the proposed deal would come from synergies in the areas of purchasing, engineering and contribution of technology, Nardelli said.

Production of vehicles for Fiat in North America will allow Chrysler to increase its plant utilization, helping to preserve and create in excess of 5,000 manufacturing jobs, Nardelli said. The overall contributions from Fiat and the synergies we realize will far exceed the value of the government loans.

Chrysler, which has already received $4 billion in emergency U.S. government loans, has requested another $5 billion.

The No. 3 U.S. automaker has a nonbinding deal with Italian automaker Fiat, which has agreed to take a 35 percent stake in Chrysler in exchange for access to technology and overseas markets.

Under the terms of the deal, Fiat will not pay cash for the stake in Chrysler, which is 80.1 percent owned by Cerberus Capital Management CBS.UL.

This is the first time Chrysler has detailed the estimated cash value of the proposed deal with Fiat, even as the automaker makes the case that it can survive without any partners.

Chryler is absolutely a viable business on a standalone basis, Nardelli said.

Chrysler and larger rival General Motors Corp (GM.N) have requested nearly $22 billion in additional U.S. government loans to ride out a deep plunge in U.S. vehicle demand.

The automaker has had a series of very constructive discussions with the U.S. Treasury and the Presidential task force on its request for $5 billion in additional aid, the CEO said in the email.

We were asked by the task force whether Chrysler is viable without a global alliance partner, he said. Our answer is absolutely yes.

MORE CASH GENERATED IF MARKET IMPROVES

Nardelli said that Chrysler needs to meet all of its government requirements as the first step in finalizing the alliance with Fiat.

Talks between the two automakers were progressing on how the two sides would implement the deal and were at a detailed stage with good momentum, a person familiar with the situation said on Monday.

The U.S. government has mandated that both Chrysler and GM undertake sweeping restructuring actions, including cutting debt and bringing down labor costs, by March 31.

Chrysler still has considerable negotiations and work to be completed to meet the government's deadline, Nardelli said.

On a positive note, Nardelli said the automaker could generate an additional $9 billion in cash if U.S. auto sales recovered to 16 million by 2012.

Chrysler, in its submission to the U.S. Treasury, has assumed U.S. vehicle sales of 10.1 million for 2009, 10.6 million for 2010, 11.1 million for 2011 and 11.6 million for 2012.

U.S. vehicle sales for January and February were at an annualized rate of around 9.3 million, lowest since 1982.

(Reporting by Poornima Gupta; Editing by Tim Dobbyn and Brian Moss)

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