GM, Chrysler in merger talks: source
Written on October 12, 2008
General Motors has had talks with smaller rival Chrysler LLC about a merger that would combine the No. 1 and No. 3 American automakers at a time when both are struggling to cut costs and shore up cash, according to a source briefed on the matter.
Separately, Ford Motor Co, plans to sell shares from its $1.4-billion stake in Japan’s Mazda Motor Co, a second source said.
Barron’s reported that GM was preparing to approach the U.S. Federal Reserve about borrowing money from the central bank’s discount window because of the logjam in credit markets that has shut it out of other borrowing.
The moves come as all three Detroit-based automakers are struggling with a plunge in U.S. sales to 15-year lows and facing tough questions from investors and creditors about whether they have the cash to ride out a deepening downturn.
Analysts said urgent steps by all three U.S. automakers to shore up cash could be expected as the global financial crisis begins to dampen auto sales in what had been fast-growing markets in Europe, Asia and South America.
But they also questioned whether an outright merger with Chrysler could serve GM’s interests.
“On the surface, it frankly doesn’t make sense,” said Aaron Bragman, an analyst with Global Insight. “The acquisition of Chrysler wouldn’t solve and problems GM has and would only make some existing ones worse.”
Representatives of Cerberus Capital Management, the private equity firm that owns an 80.1-percent stake in Chrysler, were not immediately available for comment.
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