With the U.S. auto market in shambles and the continued devaluation of the Big Three’s stocks and loans, rumors have surfaced that Chrysler is considering filing for bankruptcy. However, the U.S.’ number three automaker insists the rumors are “without merit” and that Chrysler has plenty of liquidity.

“The rumor is without merit,” Chrysler spokesman Dave Elshoff told Automotive News. “There is no basis for the rumor.”

Although Chrysler claims it ended 2007 with $9 billion in the bank, there have been some serious market concerns about Chrysler’s liquidity. Chrysler’s sales are down 23 percent this year and the automaker recently drew down a $2 billion line of credit from Daimler and Cerberus. $1.5 billion of that loan will come from Daimler, at a rate of 7 percentage points above the London interbank rate, according to Automotive News.

Chrysler lost a reported $1.6 billion in 2007.

But despite the bleak outlook, former Chrysler executive Lee Iacocca – who is credited with bringing Chrysler back from the brink in the 1980s — tried to rally Chrysler employee spirits at an event held outside Detroit. “We’ll live through it. Don’t panic. Things are going to be OK,” he said.

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