NEW YORK/DETROIT, USA - A deal to merge General Motors Corp and Chrysler LLC has hit an impasse after the Bush administration ruled out funding for it, putting any merger on hold until after the U.S. presidential election, three people with direct knowledge of the talks said on Thursday.

The development adds a new element of uncertainty for the embattled U.S. auto industry as Detroit's political allies warn the sector faces a deepening financial crisis that threatens tens of thousands of jobs.

It also opens the door for Cerberus Capital Management, which owns Chrysler, to restart talks with the Nissan-Renault alliance, one of the sources said. The private equity firm had seen the alliance as a backstop to its talks about an outright acquisition of Chrysler by GM, one of the sources said.

The sources declined to be named as they were not authorized to discuss the private talks.

GM and Cerberus declined comment. Chrysler said it was pushing ahead with its own restructuring plans.

(Reporting by Kevin Krolicki; Editing by Anshuman Daga)