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.