Cerberus in talks with Renault, GM: sources

By Kevin Krolicki and Jui Chakravorty Das

DETROIT/NEW YORK (Reuters) - Private equity firm Cerberus is in talks to sell all or part of Chrysler LLC's operations to Renault SA (RENA.PA) and General Motors Corp GM.N as it considers a range of deals that could break up the No. 3 automaker, people familiar with the talks said on Thursday. A Renault spokeswoman denied the talks.

Cerberus Capital Management CBS.UL, Chrysler's majority owner, is talking to GM about a transaction in which GM could buy some of Chrysler's assets as an alternative to an outright purchase of its smaller rival, the sources said.

Renault's interest in Chrysler range from an alliance to an acquisition of Jeep, widely considered to be Chrysler's most valuable brand, the sources said.

Any deal with Renault to buy Jeep would put the world's first and best-known sport-utility brand back in the hands of the French automaker that sold it to Chrysler along with American Motors in 1987.

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 facilities in Mexico, one of the sources said.

Cerberus' talks with GM also have included the possibility of Chrysler buying GM's remaining 49-percent share of GMAC. In one scenario, GM would swap its GMAC stake for Chrysler's auto operations, sources have 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 (F.N) to take steps to cut costs and shore up their cash holdings. Chrysler, Cerberus and GM had no 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 discussions 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 also could be merged with GMAC, the GM affiliated lender in which Cerberus owns a controlling 51 percent stake, several 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 talks.

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

Cerberus bought an 80.1 percent stake in Chrysler from Daimler AG (DAIGn.DE) 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.

Separately, Cerberus is nearing a deal to buy Daimler's remaining stake in Chrysler, one of the sources said. Any deal Cerberus might make to sell or merge Chrysler with another automaker hinges on Cerberus buying out Daimler's interest.

FROM THREE TO TWO?