GM and Cerberus step up Chrysler sale talks

By Jui Chakravorty Das and Kevin Krolicki

NEW YORK/DETROIT (Reuters) - General Motors GM.N has intensified talks to buy Chrysler's auto operations from Cerberus Capital Management in a deal that would also involve a transfer of ownership of GMAC, people familiar with the talks said on Friday.

GM intends to seek U.S. government aid to support any deal, the sources said, potentially injecting a polarizing and urgent question of economic policy into the final stretch of the presidential campaign.

Cerberus, the private equity firm that controls Chrysler, also remains in talks with other parties, including Nissan Motor (7201.T), about a deal for the struggling automaker.

GM, Cerberus and Chrysler declined comment.

But the GM talks are the most advanced and involve at a working level GM Chief Operating Officer Fritz Henderson and senior Cerberus representatives, sources said.

Chrysler Chief Executive Bob Nardelli has not been directly involved in the talks but remains in close touch with Cerberus negotiators, they said.

Cerberus, which owns 51 percent of former GM finance arm GMAC, is interested in an increased stake in the unit, sources said. GM retains the other 49 percent of GMAC at present after selling a controlling stake to the private equity firm for $7.4 billion (4.6 billion pounds) in a 2006 deal.

Cerberus is also interested in offloading the auto operations but would like to have a significant stake in the combined company, the sources said.