Chrysler and the Canadian government had told Canadian Auto Workers they wanted concessions that would make the automaker's labor costs competitive with that of non-unionized Toyota in Canada.

On Friday night they got what they asked for as Chrysler and union negotiators reached a tentative labor agreement, CAW President Ken Lewenza said.

The deal would save Chrysler about $198 million a year, Lewenza said. Labor and management said the cuts amounted to the $19 an hour in savings the company was seeking.

"This agreement meets the benchmark that was set by the federal government to guide our bargaining," Lewenza said. He said the deal left base wages and pensions untouched though.

Chrysler has until April 30 to reach deals with its unions in Canada and the U.S. and it must cement a technology sharing alliance with Fiat SpA. It also needs to provide a restructuring plan to governments in both countries that will enable it to qualify for government loans to keep it afloat.

A Chrysler official, who was briefed on the contract, said the deal eliminates Christmas bonuses, semiprivate room hospital coverage, certain drug fees and a one time vacation buyout of $3,500. It also reduces break times and vacation time. The official did not want to be identified because the membership hadn't been notified of the proposals yet.

Chrysler employs 8,500 Canadian Auto Workers. A ratification vote is scheduled this weekend at Chrysler's three Ontario plants.

Lewenza said Chrysler told him the deal could be a significant factor in Chrysler's efforts to avoid a bankruptcy filing. He said even if Chrysler does declare bankruptcy in the U.S. and Canada, the deal should hold up.

"We are very confident that our workers won't be asked to give more," Lewenza said.

Chrysler President Tom LaSorda and Al Iacobelli, Chrysler's chief bargainer and Vice President of Employee Relations, said in statements that they appreciated the concessions made by the CAW.

"The forthright discussions and final decisions made by the CAW not only benefit the Canadian represented employees, but help to ensure the Company's future competitiveness," Iacobelli said. "The tentative agreement also helps move the Company one step closer to a partnership with Fiat SpA."

The Canadian government and Ontario provincial government have already given Chrysler Canada $750 million Canadian of a $1 billion loan and have promised further support if a viable plan is put forward by April 30.

The Canadian government has said Chrysler and General Motors must present plans that maintain the 20 percent Canadian share of production. The auto industry directly employs over 150,000 Canadians plus another 340,000 Canadians indirectly.

Government officials were supportive of the agreement, but stressed that there's more to be done before the April 30 deadline.

"In addition to securing a competitive labor agreement, we expect the company's revised long-term plan to include an alliance with Fiat, and retention of Chrysler's Canadian share of production, investment, and research and development," Canadian Industry Minister Tony Clement said.

Ontario Economic Development Minister Michael Bryant said the agreement is "encouraging" but "just one step in the process."