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Update: GM approached Ford before Chrysler

 
5 2,151 views Oct 12, 2008

GM and Chrysler are in immediate need of loan funds, while Ford seeks only a standby line of credit

GM and Chrysler are in immediate need of loan funds, while Ford seeks only a standby line of credit

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Capping off a week that saw General Motors’ share price take a 31% hit in a single day comes a new report claiming the carmaker is in talks with Chrysler over a possible merger deal. According to an inside source familiar with the talks, GM approached Chrysler more than a month ago to discuss an acquisition and other “mutual interests”.

However, The Detroit News also reports that GM had approached Ford about a possible tie-up before contacting Chrysler. People close to the matter said GM CEO Rick Wagoner asked Ford CEO Alan Mulally directly about starting up negotiations but was immediately turned down by the Blue Oval boss.

Ford considers a merger with GM as contrary to its own turnaround plan, which is highlighted by a need to simplify operations. Ford this week was also reported to be considering offloading some of its stake in Mazda in an effort to raise cash, however no official confirmation has been made.

GM's most recent talks were with Chrysler’s current owner, Cerberus Capital Management, over the sale of its portion of GMAC, however the rough state of financial markets eventually took its toll on the auto-lending firm, and this in turn lead to a breakdown in talks, one source revealed during an interview with the Wall Street Journal.

In the latest round talks, GM was reportedly keen to trade its remaining 49% stake in GMAC for Cerberus’ 80.1% stake in Chrysler’s automotive operations. This would give Cerberus complete ownership of GMAC, while GM would own the 80.1% stake in Chrysler and Germany’s Daimler AG would retain its 19.9% portion.

While GM’s share price and current financial state may make it appear to be in a poor position to take control of Chrysler, the source said both parties are keen to move their remaining assets quickly and a merger still has a “50-50” chance of being approved. A final decision, however, isn’t expected for several weeks at least.

GM also announced on Friday that it had ruled out seeking bankruptcy protection, claiming that such a decision is not in the best interests of its employees, stockholders, suppliers or customers, and that its North American restructuring plan is still on track.



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Comments (5)

  1. ma_NoNameDenton avatar NoNameDenton Posted: 10/11/2008 12:33am PDT

    Dumest idea ever, but whatever, if they wanna ruin both companies
     
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  2. ma_NoNameDenton avatar NoNameDenton Posted: 10/11/2008 12:33am PDT

    Dumbest, wow, I also made a dumb mistake
     
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  3. ma_jaafar_sn avatar jaafar_sn Posted: 10/11/2008 5:17am PDT

    better for them ,
    this could be the merger of equals
    they are both close .
    this can be better than (Daimler Chrysler) Chrysler is too far from Mercedes and we all watching them now , taking platforms from nissan and other cheap companys .
     
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  4. ma_james avatar James Martinez Posted: 10/12/2008 11:56am PDT

    these are seriously scary times here that such an option would even be considered in two of the detroit three. frightening.
     
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  5. ma_NoNameDenton avatar NoNameDenton Posted: 10/12/2008 8:31pm PDT

    And next up, the exec.s will choke themselves with their neck ties
     
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