Chrysler LLC's future leadership will be determined by the U.S. government and Fiat SpA (FIATY) if Chrysler succeeds at merging with the Italian auto maker.

Chrysler Chief Executive Officer Bob Nardelli, in a note to employees obtained by Dow Jones Newswires, said a new board of directors will be appointed by the federal government and Fiat once a deal is completed. The majority of the directors will be independent.

"The board will have the responsibility to appoint a chairman," Nardelli said in the letter distributed to employees via e-mail on Thursday. "The board also will select a CEO with Fiat's concurrence."

Nardelli's comments clarify speculation on who will control Chrysler if a merger deal with Fiat is completed and what role Nardelli might play in that new company.

Private equity firm Cerberus Capital Management LP installed Nardelli as Chrysler's leader in August 2007 after acquiring an 80.1% stake in the automaker from former partner Daimler AG. Fiat CEO Sergio Marchionne said earlier this week that he would be willing to take over as Chrysler's leader if asked.

The letter also raises questions over the future of frontman and vice chairman, Jim Press, who was also hired by Cerberus to help run Chrysler. Press was president and chief operating officer of Toyota Motors in North America Inc. before joining Chrysler in September 2007.

Chrysler is racing to secure new union cost-cutting deals, reduce its debt and ink a Fiat partnership before the federally mandated April 30 deadline.

The Obama administration said it would not provide Chrysler additional access to low-interest loans if the requirements are not met, which could result in the third-largest U.S. auto maker filing for bankruptcy protection.

General Motors Corp. (GM) is facing a June 1 deadline to also win further cost-concessions from its unions and debt holders if it wants to continue receiving access to low-interest loans. The auto maker is also in the process of shedding some of its brands including Hummer, Saturn and Saab. GM executives will update the media on its progress later Friday morning.

Nardelli said seeking cost-concessions from the United Auto Workers and Canadian Auto Workers is "critical" to receiving continued support from the Obama administration. He didn't provide an update on the status of the talks.

The UAW has set aside talks with GM to concentrate on reaching a deal with Chrysler, according to a person familiar with the negotiations. The CAW is slated to resume formal negotiations on Monday. Chrysler has threatened to pull its automotive production from that country if it doesn't get union concessions.

The auto maker is also waiting to hear back from its creditors after the U.S. Department of Treasury extended a concessions proposal to the group. The debt holders are expected to respond shortly, Nardelli said.

"As we enter this crucial period, I want you to know that I appreciate your tireless efforts and dedication to the cause of ensuring Chrysler's future success," Nardelli said in the note. "I ask you to stay focused on the job at hand, remain positive about our future and keep supporting one another in everything you do."

-By Jeff Bennett; Dow Jones Newswires; jeff.bennett@dowjones.com; 248-204-5542