Merger possible? GM, Chrysler talk

General Motors Corp. and Chrysler LLC owner Cerberus Capital Management have discussed the possible sale of Chrysler to GM, people familiar with the matter told the Free Press Friday night.

The idea that two of Detroit’s three major automakers could unite has been floated several times in recent years — often around major auto shows — without coming to fruition. But if such a merger were to happen, it would not only reshape the global auto industry but also stand as a landmark moment in Detroit’s history.

Talks between GM and private-equity firm Cerberus began more than a month ago, the New York Times reported, noting the negotiations are not certain to produce a deal. The Times said two people close to the process said the chances of a merger were “50-50″ as of Friday and would likely take weeks to work out.

The Wall Street Journal, citing people familiar with the matter, said Cerberus proposed a swap: GM would take Chrysler’s automotive operations and Cerberus would take the 49% of GMAC that GM still owns.

The Journal said talks were halted by financial market upheavals, without detailing a date, but said they could resume quickly “because both parties want to move those assets quickly.”

Citing a source familiar with the talks, the Associated Press reported this morning that Chrysler has discussed a full merger or acquisition with GM. The person did not want to be identified because the talks have not been made public, AP reported.

Markets have been in turmoil for weeks — activity that has snowballed from the federal takeover of Fannie Mae and Freddie Mac on Sept. 7 to last week’s $700-billion bailout of the financial system. The Dow Jones industrial average lost 2,400 points over the last eight trading sessions.

GMAC, the Detroit-based longtime finance arm of GM, is now 51% owned by Cerberus.

Cerberus owns 80.1% of Chrysler, though it is reportedly in talks to acquire the remaining 19.9% from Daimler AG.

Particularly at global auto shows, executives from automakers are known to discuss ideas that could — though rarely do — change the shape of the industry.

“Without referencing this specific rumor, as we’ve often said, GM officials routinely discuss issues of mutual interest with other automakers,” said company spokesman Tony Cervone.

Chrysler spokeswoman Shawn Morgan said Chrysler declined to comment on the reports.

GM talked about buying Chrysler from then-DaimlerChrysler AG in early 2007, before Cerberus acquired its majority stake.

In 1996, GM had talks — largely forced by then-shareholder Kirk Kerkorian — with Renault SA and Nissan Motor Co. about a possible alliance. Those talks also stalled and Kerkorian, now a major investor in Ford Motor Co., sold off his stake.

Later that year, Automotive News reported that GM and Ford even discussed merging.

Pressure on GM and Chrysler is profound.

GM, which turned 100 last month, has lost almost $70 billion over the last three and a half years. Its stock has fallen to lows not seen since the early 1950s.

Cerberus joined the auto industry just before the business headed into its worst era in at least a decade and a half.

Both companies have tried to project a lack of panic, however. Chrysler officials insist that targets are being met and that investors are committed. GM issued a statement on Friday saying it has no plans to seek bankruptcy protection.

Source:Freep.com

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