NEW YORK, Nov 7: General Motors said on Friday it has suspended takeover talks with Chrysler to focus on dealing with its dangerous cash crunch amid an economic downturn and plunging sales in North America and Europe.

GM, the largest US automaker, warned that it would run out of cash in the first half of next year unless economic and auto market conditions “significantly improve” and announced a series of belt-tightening steps to survive the downturn.

“GM has recently explored the possibility of a strategic acquisition that it believed would generate significant cost reduction synergies and substantially strengthen GM’s financial position in the medium and long term, while being neutral or modestly positive to cash flow even in the

near term,” the company said, without naming Chrysler.

“While the acquisition could potentially have provided significant benefits, the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges and, accordingly, considerations of such a transaction as a near-term priority have been set aside.”

For the third quarter, GM announced a loss of $2.5 billion and said it had burnt through another $6.9 billion of cash during the three-month period.

Chrysler reiterated on Friday that it “neither confirms nor discloses” the nature of its private business meetings.

In a statement after the GM announcement, the number-three US automaker said it continued to focus on profitability in the challenging economic and market conditions.

“As an independent company, we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid in our return to profitability,” the private equity firm said.

GM and private equity firm Cerberus, the owner of Chrysler, had been struggling to reach a deal, sources close to the negotiations said recently.

Much of the pressure to cut a deal seemed to be coming from banks which stand to lose billions should Cerberus fail to meet its obligations, sources said.

JPMorgan Chase and Citibank were among a consortium which advanced Cerberus more than $7 billion to purchase Chrysler from Daimler AG in August 2007, just before the financial markets started to sputter from the first tremors from the housing and credit crisis and demand for automobiles fell sharply.—AFP