Chrysler owner Cerberus Capital Management now favours a merger with GM and has stopped talking to the Renault-Nissan Alliance.

The Detroit News , citing “sources familiar with the situation” said the talks with Renault-Nissan had stopped as both sides acknowledged Cerberus ‘s preference to conclude a deal for Chrysler with General Motors.

No more talks between Cerberus and Renault-Nissan negotiators had been scheduled, the sources told the Motown paper on Friday, although the parties had not ruled out future discussions.

Cerberus reportedly favours a GM-Chrysler deal, viewing it as financially more advantageous and also better for the US auto industry.

Nissan-Renault CEO Carlos Ghosn last week dismissed reports of merger talks with Chrysler as speculation, adding that it did not make sense to risk cash in the current economic environment to form a strategic alliance, according to Reuters.

It has also been reported that GM and Chrysler would have to wait until after the US presidential elections on Tuesday to conclude any deal as the Bush administration had ruled out providing government funding for it.

A just-auto source in North America said that an announcement of some sort of a GM-Chrysler deal had been widely expected on Friday.