Chrysler says it no longer will seek a U.S. Department of Energy loan to fund the development of gas-electric hybrids and electric vehicles.
"The Department of Energy's proposed terms were very restrictive and compliance would have negatively affected our operational flexibility," Chrysler said in a statement.
Chrysler Chief Executive Sergio Marchionne said last April that the company needed the loan to be competitive.
Chrysler initially applied for more than $7 billion in 2008 under the Energy Department's Advanced Technology Vehicle Manufacturing program, but later reduced the request to less than $3.5 billion.
Chrysler said it can develop competitive, fuel-efficient vehicles without the federal loan.
"While we were continuing to work with Chrysler to come to an agreement, we are pleased that they are capable of achieving their business goals without department support," said Damien LaVera, an Energy Department spokesman.
The $25-billion loan program was funded by Congress during President George W. Bush's administration. There is still $16 billion available, LaVera said.
The Energy Department has awarded $9.1 billion in loans under the program to several automakers, including $5.9 billion to Ford, $1.4 billion to Nissan and $529 million to Fisker Automotive, a manufacturer of electric cars.
General Motors withdrew its application in January 2011.
Chrysler plans to launch a battery-powered Fiat 500 this year.
Snavely writes for the Detroit Free Press/McClatchy.