Chrysler is in talks to take back a Sterling Heights, Michigan, assembly plant that it had abandoned in bankruptcy, a move that could save about 1,200 jobs once expected to be eliminated by the end of 2010.

Chrysler, which emerged from bankruptcy in June under the management control of Fiat, has been offered a tax break from the Sterling Heights City Council if it keeps the plant open, and has until February 16 to reach a deal to take it back, Chrysler spokeswoman Jodi Tinson said on Wednesday.

As part of Chrysler's bankruptcy restructuring last year, the plant was placed with OldCarco LLC, the shell company that represents the assets of Chrysler that remain in bankruptcy and were not bought by Fiat.

The plant, which makes the Chrysler Sebring and Dodge Avenger sedan, employs approximately 1,200 workers represented by the United Auto Workers union.

The plant got a reprieve from an earlier plan for the facility's closing at the end of 2010, after Chrysler decided to produce upgraded versions of the Avenger and Sebring models through 2012. Chrysler is currently discussing with the UAW about how long the plant will stay open.

But Chrysler Chief Executive Sergio Marchionne, who also heads Fiat, has said it is premature to discuss whether the automaker would make the Sterling Heights plant part of its ongoing operations.

Such a step would represent the first major revision of the restructuring of Chrysler directed by the Obama administration and funded with $10 billion in U.S. assistance. Chrysler had initially planned to close seven U.S. plants under the restructuring.

In January, the Sterling City Council approved tax incentives for Chrysler to keep the plant open and asked the company to make a decision by Tuesday. It gave the automaker an extension to February 16 after Chrysler asked for more time to consider.

Chrysler's five-year product plan, unveiled by Marchionne in November, calls for the launch of an all-new mid-size sedan for Chrysler based on Fiat platforms in 2013. The Sebring and Avenger sedans are expected to stay in the market at least until the Fiat-engineered replacement arrives.

(Reporting by Soyoung Kim, editing by Dave Zimmerman)

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