DETROIT, USA - A Minnesota car dealer sued Chrysler Financial Services on Thursday, accusing it of acting in bad faith by freezing credit lines and thereby frustrating day to day operations and the planned sale of a rental car business.

Denny Hecker, who said he has done business with Chrysler Financial for nearly 20 years, filed the lawsuit in U.S. District Court in Minneapolis after several weeks of negotiations failed to resolve the dispute.

A representative of Chrysler Financial declined to comment on the lawsuit.

The stress on Chrysler, General Motors Corp and Ford Motor Co has been profound, with a decline in U.S. light vehicle sales to rates not seen in a quarter century as they desperately lobby the U.S. government for a financial rescue plan.

Chrysler Chief Executive Bob Nardelli said on Thursday that the automaker needs federal money and an alliance to survive the economic downturn.

Auto dealerships and related businesses such as parts companies are also feeling the strain. Bill Heard Enterprises Inc, one of the biggest GM Chevy dealerships, sought bankruptcy protection several weeks ago.

Hecker's business with Chrysler Financial has included financing for his vehicle leasing business, floor plan financing for dealerships and fleet financing to a car rental business.

In the lawsuit, Hecker said the ties between his businesses and Chrysler were treated with "flexibility and grace" over most of the two decades rather than through a strict application of contract terms. That changed after Cerberus Capital Management acquired Chrysler, the lawsuit said.

Hecker said in the lawsuit, a copy of which was obtained by Reuters, that Chrysler Financial suspended floor plan credit lines without notice and notified manufacturers, as well. It had extended floor plan financing to more than a dozen dealerships.

The lawsuit seeks damages in excess of $75,000 and attorney fees and costs for breach of contract, fraud, negligent misrepresentation, tortious interference with contractual relations and defamation.

All three of the U.S.-based automakers are pressing for an industry rescue plan. GM asked its U.S. dealers on Wednesday to lobby Congress for approval of an aid package.

(Reporting by David Bailey, Soyoung Kim and Kevin Krolicki)