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Chrysler LLC is laying out plans to cut by a third the number of models in its product line and significantly reduce the number of dealers selling its cars, company officials told dealers in meetings recently.

The moves are part of a strategy to shrink the company to a level where it can generate healthy profits, people familiar with the matter said.

It is a reversal from the strategy when the auto maker was part of DaimlerChrysler AG and it aimed to nearly double sales to about four million vehicles a year by the end of the decade.

In December, Chief Executive Robert Nardelli told employees Chrysler was on track to lose about $1.6 billion last year, people familiar with the matter said.

In meetings with dealers last week and this week, Chrysler executives said they have accepted the "reality" that Chrysler can't expect to increase its sales volume substantially.

Chrysler spokeswoman Lori McTavish confirmed the auto maker's new management team is trying to "right-size" the company and expects to reduce the number of dealers in its sales network, but declined to elaborate.

To trim costs, Chrysler will prune its product line further, Chrysler Vice Chairman Jim Press and other officials said, people familiar with the matter recalled.

Last year Chrysler dropped three models, leaving it with about 30 vehicles in total in the lines sold by its Chrysler, Jeep and Dodge brands.

In a few years, the three brands together will probably offer a total of 15 or 20 -- roughly six cars, six trucks and six sport-utility vehicles, people who attended the meetings said.

At the same time, Chrysler, which is now a closely held company controlled by Cerberus Capital Management LP, is looking at ways to shrink its network of about 3,600 dealers in the U.S.

Chrysler and Cerberus have discussed the idea of offering loans to help larger dealers buy out smaller dealers, Mr. Press said in the meetings, people who were in attendance said.

For the past several years the company has encouraged dealers to use mergers or acquisitions to create single "alpha" stores carrying Chrysler, Jeep and Dodge vehicles. But that effort has progressed too slowly, reducing the number of dealers by a small number each year.