UPDATE 5-Canada extends lifeline, takes stake in Chrysler

* Canada to take 2 percent equity stake

* Ottawa sees smaller company in smaller industry

* Ottawa, Ontario to provide $2.42 billion

* U.S. to take 8 percent stake, provide $8.08 billion (Updated throughout; figures in U.S. dollars unless noted)

By John McCrank and Pav Jordan

TORONTO, April 30 (Reuters) - Canada's government will take an ownership stake in troubled automaker Chrysler in exchange for more than $2 billion in loans, under a sweeping North American rescue plan, government officials said on Thursday.

Chrysler filed for Chapter 11 bankruptcy protection in the United States earlier in the day and also entered into an alliance with Italian automaker Fiat SpA (FIA.MI).

Ottawa and Washington demanded the Detroit company partner with Fiat by Thursday as a condition for funding.

The Canadian government, along with the province of Ontario, will provide $2.42 billion in financing to assist with the restructuring process. Under the terms of the deal, Canada will take a 2 percent stake in the revamped Chrysler and will have one director on its nine-member board.