The publishing giant is also considering selling its Seattle Post-Intelligencer paper and is examining the option of moving it entirely online.
Hearst said in a statement on its website yesterday that the Chronicle lost more than $50m last year and that this year's losses to date are worse.
The publisher said it is "undertaking critical cost-saving measures including a significant reduction in the number of its unionised and non-union employees".
It added that if these savings cannot be accomplished within weeks, the company will be "forced to sell or close the paper".
Hearst had already embarked on a broader cost-cutting strategy on the paper. It increased the Chronicle's cover price on both home delivery and single cover copies. It is also planning to use new printing presses from June, giving it "industry-leading colour reproduction capabilities".
The Chronicle, which was founded in 1865, during the US's gold rush, was bought by Hearst in 2000.
Frank Bennack Jr, vice chairman and chief executive of Hearst Newspapers, and Steven Swartz, its president, said in a joint statement: "Because of the sea change newspapers everywhere are undergoing and these dire economic times, it is essential that our management and the local union leadership work together to implement the changes necessary to bring the cost of producing the Chronicle into line with available revenue.
"Given the losses the Chronicle continues to sustain, the time to implement these changes cannot be long. [They] are designed to give the Chronicle the best possible chance to survive and continue to serve the people of the Bay Area with distinction, as it has since 1865.
"Survival is the outcome we all want to achieve. But without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down."
The pummelling of the US newspaper market is growing in severity. Earlier this week, it emerged that Philadelphia Newspapers, which owns The Philadelphia Inquirer, The Philadelphia Daily News and Philly.com, had filed for bankruptcy -- a move that it claims will not affect its daily operations.
The woes at Philadelphia Newspapers came on hot on the heels of last week's news that The New York Times Company suspended its first quarter dividend in order to pay off its debt and conserve cash.
In January, Hearst Corporation said that it might shut down the 145-year old Seattle Post-Intelligencer if it cannot find a buyer in 60 days and that a digital-only future was one option being examined. That deadline is fast approaching.
Last week the paper along with the bigger Seattle Times asked US lawmakers for a temporary tax, saying that some of the state's papers are "holding on by our fingertips".