A U.S. congressman has asked the Obama autos task force to withhold further emergency aid to Chrysler until the automaker resolves a financial dispute with an Indiana county stemming from a failed plant project.

U.S. Representative Dan Burton, a Republican whose district includes the site, wants Treasury Secretary Timothy Geithner to withhold additional aid until Chrysler puts a plan on the table that would make Tipton County whole for costs incurred preparing for the plant.

I strongly believe that no additional taxpayer money should be provided to Chrysler until the dire financial situation facing Tipton County ... is equitably resolved, Burton said in a letter to Geithner on Thursday.

Chrysler, about 80 percent controlled by Cerberus Capital Management , has received $4 billion of government aid. It has asked for $5 billion more in loans that in part would help complete an alliance with Italy's Fiat SpA .

The failure of an alliance that Chrysler and private German auto parts maker Getrag had formed for a new transmission plant in Tipton stands at the center of the dispute.

Chrysler and Getrag had announced plans for a $530 million plant in 2007 that would bring about 1,200 jobs to Tipton. Production was to start in 2009, but the alliance broke apart and Chrysler terminated the supply agreement last October.

Tipton issued $3.1 million in bonds payable from county property taxes and $1.1 million of bonds payable from county income tax revenue to cover infrastructure costs. It also paid out more than $300,000 in county funds for improvements.

Tipton also issued $5.5 million of bonds each to Chrysler and Getrag in financing the infrastructure improvements.

Indiana state securities investigators also have opened an investigation into Chrysler's handling of the project, said Jim Gavin, a spokesman for Indiana Secretary of State Todd Rokita. Formal charges have not been filed, he said.

Secretary of State Todd Rokita has the ability and the responsibility and the priority to make things right for the taxpayers of Tipton County, Gavin said.

The Chrysler and Getrag dispute spilled over into court. Chrysler alleged in a lawsuit that Getrag failed to meet a financing deadline, and a Getrag unit created solely for the alliance sought bankruptcy protection in November, saying it owed more than $500 million to over 200 parties for the plant.

Getrag spokeswoman Michelle Culver declined to comment on the Burton letter or the securities investigation, saying that the parts supplier was not a focus of the investigation.

Chrysler declined to comment on the pending litigation.

Chrysler in a statement said it had offered on Tuesday to transfer the $5.5 million of bonds to Tipton County at no cost. It also said it had paid for about $14.5 million in infrastructure improvements around the Tipton project.

(Reporting by David Bailey; Editing by Gary Hill)

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