Cerberus in wide-ranging talks with Renault and GM

DETROIT/NEW YORK (Reuters) - Chrysler LLC is in talks to sell its operations to RENAULT (RNO.PA)SA and General Motors Corp and is considering a range of deals that could break up the No. 3 U.S. automaker, people familiar with the talks said on Thursday.

Cerberus Capital Management is also talking to General Motors Corp about a transaction in which GM could acquire some of Chrysler's assets as an alternative to an outright purchase of its smaller rival, the sources said.

Chrysler assets under consideration for purchase by GM include Chrysler's top-selling minivan line, a market segment Chrysler pioneered almost 25 years ago, and its truck-production facility in Mexico, one of the sources said.

The contacts between Cerberus and the automakers remain wide-ranging and preliminary but have been given urgency by the sharp downturn in auto sales that has forced Chrysler, GM and Ford Motor Co to take steps to cut costs and shore up their cash holdings.

Chrysler, Cerberus and GM had no comment. A representative for Renault could not be reached for comment.

Other deals being considered by Cerberus hinge on whether Chrysler's key assets now have more value separately than together, people familiar with the discussion said.

As a result, Cerberus is looking at selling its Mopar parts unit, spinning off its engineering operations as a separate company and hiving off Chrysler Financial, one of the sources said.

That captive finance company could also be merged with GMAC, the GM affiliated lender in which Cerberus owns a controlling 51 percent stake, several sources said.

In addition, Cerberus has had talks with GM about acquiring the automaker's remaining 49 percent share of GMAC and that remains a possibility, those sources said.

But all of the potential deals have been complicated and slowed by the volatility in financial markets and frozen credit markets, according to the people familiar with the sensitive talks who were not authorized to speak about the discussions.

Markets turmoil has made it far more difficult for Cerberus and potential bidders to agree on the value of Chrysler's various parts and GMAC, the sources said.

Cerberus bought an 80.1 percent stake in Chrysler from Daimler AG in 2007 for $7.4 billion, but the automaker, like its listed Detroit-based rivals, has been hit hard by a steep decline in U.S. auto sales to 15-year lows.

The still-ongoing talks between GM and Chrysler have revived discussions about a potential merger that started in early 2007 before Chrysler was sold to Cerberus.

(Additional reporting by David Bailey in Detroit)

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