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UPDATE 1-Hyundai Motor, Daimler discuss alliance shift

(Recasts with Hyundai announcement, updates shares)

SEOUL, April 26 (Reuters) - South Korea's top auto maker Hyundai Motor Co said on Monday it was in talks with German car maker DaimlerChrysler to work together on a "project-by-project basis", rather than have a full alliance.

DaimlerChrysler, which has a 10 percent stake in Hyundai Motor worth close to $900 million, is reviewing its Asian strategy and said last week it would cut off financial support for Mitsubishi Motors Corp , and may sell a 37 percent stake in the unprofitable Japanese firm.

Concern over the future of Hyundai Motor's alliance with the German group pushed down Hyundai shares on Monday. The stock closed off 5.85 percent at 46,700 won ($40.3), dragging the broader market down 1.74 percent.

Pressed by the Korea Stock Exchange to clarify market talk that the company may end its alliance with DaimlerChrysler, Hyundai said in a brief statement the two companies were discussing all options to "reshape their alliance".

DaimlerChrysler supervisory board sources said last week the company was considering selling its Hyundai Motor stake. A DaimlerChrysler spokesman declined then to comment other than to say the two firms were in talks on various issues.

Hyundai Motor said on Monday no decisions had yet been taken.

Hyundai and Daimler have been working together to produce commercial vehicles and engines, and the Korean car maker may find it hard to secure new technologies for diesel engines for commercial vehicles if the alliance broke down.

"Severed ties could make it difficult for Hyundai Motor to access DaimlerChrysler's advanced diesel engine technologies in the long term," said Lim Dong-soo, analyst with Nomura Securities. ($1=1158.0 Won)