General Motors Corp. (GM) is unlikely to make a first-round bid for DaimlerChrysler AG's (DCX) Chrysler unit, leaving just private equity firms and auto-parts supplier Magna in the running, a source familiar with the matter said on Wednesday.

General Motors is more likely to keep a watching brief on the bidding process and consider buying any spare assets that buyout firms do not want, the source added.

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The source was speaking after a report in the Times newspaper, which cited unnamed sources close to the talks, said GM has decided against making a bid because the company felt it had no need for the extra capacity.

Bid proposals are due to be submitted on Friday, according to the Times.

Sources familiar with the matter have said that U.S. investment bank J.P. Morgan Chase (JPM) is advising Germany's DaimlerChrysler, the maker of Mercedes cars, on the possible sale of its U.S. arm.

GM and J.P. Morgan declined to comment.

People familiar with the matter have in the past told Reuters that buyout firms Cerberus Capital Management and Blackstone, which has teamed up with Centerbridge, and Ontario-based auto-parts supplier Magna International Inc. have emerged as leading candidates for Chrysler Group, now the No. 4 U.S. automaker.

GM also has spoken to Chrysler about expanded cooperation in vehicle development or a potential acquisition, according to those familiar with the talks.

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