Friday, October 17, 2008

GM, Chrysler still talking marriage

Chrysler, which is owned by Cerberus Capital Management, and General Motors are still in talks to merge, but financing is the issue that's keeping them apart, a person familiar with the talks told the Detroit Free Press.
But Cerberus, a private equity firm, is “willing to put in cash to any deal that makes sense,” another source said.
A merger is seen as Cerberus’ preferred solution for Chrysler, where U.S. sales have dropped 25 percent so far this year, the people said. But financing a deal such as this can be complicated and could involve money flowing either way. When Cerberus acquired majority control of Chrysler from Daimler last year, the $7.4-billion deal included then-DaimlerChrysler spending money to get rid of its U.S. unit.
Because neither Cerberus nor GM is making public statements about the talks, it’s hard to definitively say how things are going. What is clear is that a number of scenarios -- including a laundry list of automakers and possible equity stakes -- are floating around Detroit about the future of the auto industry and Chrysler in particular.
GM hopes to have a deal by the end of the month, the Wall Street Journal reported Thursday.
It noted that J.P. Morgan Chase, a key lender to both automakers, favors a deal. Citing people briefed on the talks, the paper said a deal is far from settled.
The turmoil in the U.S. auto industry could have historic ramifications. Industry sales in the United States are down almost 13 percent; GM’s sales are down nearly 18 percent.
GM reportedly had earlier approached Ford about buying that company, but Ford rejected those overtures, news reports said.

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