(Adds details on the loan starting in third paragraph, comment from Chrysler spokeswoman in fourth paragraph and updated share prices.)

By Jeff Bennett and Josee Valcourt

DETROIT -(Dow Jones)- Chrysler LLC, facing liquidity pressures amid a steep decline in the U.S. automotive market and rising commodity costs, tapped a $2 billion credit line made available as part of its sale last year from Daimler AG (NYSE:DAI) (DAI) to Cerberus Capital Management LP.

The move comes as Chrysler scrambles to respond to a dramatic customer shift amid record-high fuel prices away from pickup trucks and sport-utility vehicles, which make up the majority of the company's product portfolio. Chrysler is also stung, more so than its main competitors, as a result of its relatively high reliance on the U.S. market, which accounts for 90% of its sales.

The credit line had been established in August 2007 when the former DaimlerChrysler untied its nine-year long partnership with Chrysler by selling an 80.1% stake in the company to Cerberus. Chrysler was required to draw the funding within 12 months of the Aug. 3 closing date of the acquisition by Cerberus.

Chrysler spokeswoman Shawn Morgan said the drawdown of the $2 billion "is not related to current economic conditions."

"Chrysler has a clear strategy to build a profitable enterprise for the long term as an independent company, even in this challenging economy," Morgan said in an emailed statement. "Despite the challenges, we are meeting or exceeding our financial targets."

Chrysler and its domestic peers - Ford Motor Co. (NYSE:F) (F) and General Motors Corp. (NYSE:GM) (GM) - have been battered by the steep decline of demand for the large vehicles that have long been the main source of sales and profits for the U.S. auto industry. The Detroit Three now face the prospect of higher cash outflows to offset the impact of lower revenue, as well as additional costs for restructuring and raw materials, and rising expenditures to develop more-fuel- efficient products.

On Friday, Standard & Poor's Ratings Services and Moody's Investors Service lowered their outlooks on the ratings of the Detroit manufacturers owing, in part, to liquidity concerns. The announcements from the ratings agencies followed news that Ford had further cut its production plans and raised its projections on cash outflows.

"As a result of the challenges that Chrysler may face in contending with the ongoing shift in demand away from trucks and SUVs, the company will likely face large cash requirements during 2008 and 2009 that will considerably narrow its liquidity position," Moody's said last week. The rating agency had previously forecast that Chrysler would have enough cash to last through 2010.

In the passenger car segment, which now makes up more than half of the U.S. market and is growing, Chrysler had just a 5.2% market share in May, according to Autodata Corp. Cars made up just 28% of Chrysler total sales. This month the company could see its share of the overall U.S. market for cars and light trucks slip below 10% for the first time in decades.

Chrysler, which doesn't disclose financial details, hasn't announced the kinds of large-scale production cuts that GM and Ford have over the past month. Chief Executive Robert Nardelli has said that Chrysler may have to cut production of large vehicles to adapt to the downturn, and the company is also taking other cost-cutting measures.

GM, the largest U.S. auto maker, on Monday said it will slash pickup truck and SUV production by 157,000 vehicles over the next 10 weeks. The news came three days after Ford, which has abandoned its hopes of turning a profit next year because of the sales swoon, said it would cut third-quarter production by 25% and fourth-quarter production up to 14%.

At the same time, GM and Ford have each announced plans to move more quickly to introduce fuel-efficient cars, as executives believe the recent shift in demand is structural in nature, not temporary.

Foreign auto makers have also been affected, though relatively less so given their smaller reliance on large vehicles in the overall sales mix.

Toyota Motor Corp. (NYSE:TM) (TM) said Tuesday it may cut its 2008 sales target in the U.S. because of slumping sales. It has already begun slowing production of its Toyota Tundra pickup truck.

GM shares, which hit a 33-year low on Monday and are down 47% since the start of the year, gained 2.2% to finish Tuesday's session at $13.19 and are unchanged in late trading. Ford shares gained 0.8% to close at $5.32 but are down to $5.30 after hours. Toyota shares slipped 2.1% to $95.83 on the New York Stock Exchange and are unchanged in late trading. Chrysler isn't publicly traded.

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

-By Josee Valcourt, Wall Street Journal; 248-204-5519; josee.valcourt@wsj.com

(Christoph Baeuchle of Dow Jones Newswires contributed to this report.)

    (END) Dow Jones Newswires   06-24-08 1739   Copyright (c) 2008 Dow Jones & Company, Inc.