UPDATE 1-Chrysler says cash steady as suitors circle

(Adds quotes from executive, background, bylines)

By David Bailey and Kevin Krolicki

DETROIT, Oct 22 (Reuters) - Chrysler President Jim Press said the automaker's steadier company cash flow may be a reason for suitors to be considering its assets, but declined on Wednesday to directly address whether the automaker was in merger talks with General Motors Corp (GM.N).

Chrysler has been facing the "reality" of its lower sales and market share as it restructures, Press said, adding that the strategy was showing signs of success.

Speaking at an event at a hotel in Detroit's Renaissance Center, the home of GM's headquarters, Press said that the U.S. auto industry risks being distracted by speculation about a wrenching consolidation and the financial market turmoil.

Chrysler's owner Cerberus Capital Management [CBS.UL] has been in talks with GM and other automakers about the possibility of the sale of part or all of its assets, according to people familiar with the matter. GM, Chrysler and Cerberus have all declined to comment.

The only reference Press made to GM was a joke about speaking to the large audience in the shadow of GM's headquarters.

"I just want to get it out of the way right now, we only came here for dinner," Press said. "That's the only reason we are in this building and I really can't say anything else about the fact that we are here."

"I have high praise for Rick Wagoner; I think he really is a great guy," Press said of GM's chairman and chief executive.

GM, the preferred merger partner for Cerberus, has been interested in acquiring the smaller automaker in part to gain access to cash on its balance sheet that totaled about $11.7 billion as of the end of June.

Press declined to give an updated total for Chrysler's cash holdings, but said the privately held automaker's cash flow had stabilized despite a 25 percent drop in its U.S. vehicle sales through September.

"We have been able to stop the high level of negative cash flow and have been able to stabilize it, maybe that is one of the reasons a lot of people have been smelling around the Chrysler vault lately, I don't know," Press said.

Press, who was hired away from Toyota Motor Corp by Chrysler last year, said the automaker would move ahead with its investment in a more fuel-efficient V-6 engine program that it has code-named the "Phoenix" project.

"The Phoenix engine program is going forward full steam," Press told reporters after the speech. "It's a great engine. We're driving the prototypes today."

Chrysler announced plans to invest roughly $3 billion in the new engine program in 2007, just on the cusp of its acquisition by Cerberus.

However, with Cerberus now shopping Chrysler to potential buyers, including GM, speculation has grown that the engine could be put on hold.