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General Motors, Chrysler reopen merger talks

Source: PTI
December 18, 2008 16:36 IST
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General MotorsĀ  Corp and Chrysler LLC have reopened merger talks, as Chrysler owner Cerberus Capital Management LP has signalled its willingness to give away part of its ownership in the auto maker, a media report said today, citing people familiar with the goings-on.

With cash running low at both companies, the Wall Street Journal said Cerberus took the initiative to restart discussions that sputtered just weeks ago. At that time, both GM and Chrysler viewed a business combination as impractical.

The renewal of talks could be a way for Cerberus to show Washington -- weighing a $14-billion rescue package for the auto industry -- that it wants to cooperate in restructuring the industry, WSJ said quoting knowledgeable people.

And it could offer the firm a way to protect its stakes in two distressed auto-finance companies, GMAC LLC and Chrysler Financial, which are crucial to the survival of the Detroit auto makers, it added.

But the paper said it is not clear what effect the renewed merger talks might have on the intricate political calculus hanging over a government rescue of the auto makers.

On Wednesday, Chrysler said it would suspend production at all 30 of its plants for a month starting Friday.

Earlier this month, Congress pressed Cerberus to inject fresh capital into Chrysler as part of a rescue plan. So far, the firm has rejected the idea, saying shareholders of rivals GM and Ford Motors Co are not being asked to contribute more capital, and that its investment charter prohibits such move.

One way in which Cerberus might make concessions, however, could be to give away some of its principals' stakes in Chrysler as part of a broader restructuring, the Journal said. That could mean giving a future government auto czar discretion to distribute Cerberus' stake to the United Auto Workers union or even to GM.

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