Renault, Nissan and Fiat have all ruled themselves out

A leading market analyst said Daimler had received an approach from a group including Canadian engineering firm Magna International about a $4.6bn bid.

In response, Magna said it was "reviewing potential alternatives" regarding Chrysler's future.

Chrysler made a $1.48bn loss last year as its US sales deteriorated.

Sale signal

The Detroit-based firm is cutting 13,000 jobs in its home market in an effort to try and make itself more competitive.

German parent DaimlerChrysler revealed last month that it was reviewing all options regarding Chrysler's future, a move which industry experts said signalled the business was up for sale.

It is imperative Magna has a full understanding of the situation regarding the future of the Chrysler Group Magna International spokeswoman Who may buy Chrysler? See DaimlerChrysler shares

Daimler-Benz bought Chrysler for $36bn in 1998 but its fortunes have nosedived in recent years as consumers have favoured smaller, more fuel-efficient cars made by firms such as Toyota.

Reports suggested that Magna International, one of Chrysler's largest clients, may join forces with a private equity firm to mount a bid.

Magna said any such discussions were confidential but it acknowledged that it was monitoring Chrysler's future.

"DaimlerChrysler is one of Magna International's largest customers," a Magna spokeswoman said. "It is imperative that Magna has a full understanding of the situation regarding the future of the Chrysler Group."

Magna manufactures systems and components for many of the world's top carmakers as well as designing and assembling vehicles.

Chrysler declined to comment on reports that it had received a bid approach although a company official told Associated Press that a sale was not imminent.

Staff costs

Many of the world's leading carmakers, including Volkswagen, have ruled out making a bid for Chrysler amid concerns about the firm's huge staff health care liabilities.

Industry experts believe that among the world's top car firms, only General Motors may be interested in Chrysler but the firm has said nothing on the issue.

GM's shares fell 4% on Friday as analysts nervous about a possible GM approach to Chrysler weighed up the likelihood of an alternative bid.

GM, Ford and Chrysler, the 'big three' US carmakers, have all been struggling in the face of changing consumer buying habits and the huge costs of running their businesses.

It is estimated that Chrysler's employee liabilities could be as high as $19bn, some way above the estimated value of the firm's assets such as its factories and brand name.