Report: GM-Chrysler back in merger talks, GM dismisses as rumor

Posted Thu Dec 18 2008 7:26 AM by Ralph Hanson

GM previously said it would consider a merger as a condition of federal aid, but now says nothing has changed since talks ceased in November

Two weeks ago Chrysler CEO Bob Nardelli and Washington lawmakers put the idea of a General Motors-Chrysler merger back in play after the abrupt November end to talks, caused in part by a lack of funding. Now the two companies are back at the bargaining table according to the latest reports. Cerberus Capital Management, Chrysler's primary owner, has indicated a willingness to part with some of its stake, but a GM spokesman says there are no ongoing merger talks.

During the carmakers' most recent trip to Washington, Nardelli told Congress that his company would be open to a merger with GM as a condition on federal funds. General Motors CEO Rick Wagoner responded with a somewhat less definite commitment, but was at least willing to seriously consider a merger. The denial of any newly restarted talks, made by spokesman Tony Cervone to The Detroit News, was clear, but that could be chalked up to a desire to keep the subject private for the time being.

The Wall Street Journal's report of reopened merger talks, on the other hand, leaves some holes in the story as well. As both companies run dangerously low on cash, they are supposedly once again considering a merger of their own accord. GM recently told Congress it needs at least $8 billion in emergency loans over the next two months, and Chrysler will need $4 billion to make it through to March, 2009. Where that money might come from is yet unknown, and the cost of merger would only hasten the need for a cash infusion at both companies.

During Senate questioning on the issue earlier in December, Nardelli stated that the joinder of GM and Chrysler could result in savings of $8-10 billion for the new joint company. Finding the funding necessary to complete the merger and actually get to those savings, however, could be an impossible goal. A previous application to the U.S. Treasury for $5-$10 billion in merger aid was rejected.

The UAW is also not excited about the merger because of the massive job losses that would result. Those job losses, among other reasons, are part of why GM previously called an end to the merger talks.

Now that the merger is - possibly - back under consideration, it will remain for the accountants within and the two companies and potentially the government to arrive at a solution that results in a more streamlined, less costly organization rather than a simple conglomeration of overlapping brands and products. Whatever the result for the merged company, however, it's clear that the cost to the American auto worker could be high.

Reader Comments

Mon Oct 20 2008 9:30 PM
NoNameDenton says

Dumb and Dumber 3
Fri Dec 5 2008 6:58 AM
Jim says

Time for Cerberus to sell Chrysler to Irwin Jacobs (if he's still alive) and let Irv the Liquidator do for Chrysler what he did for AMF. Seems to me most of those brands are doing quite well and at least one, Harley Davidson, have been blow out successes.

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