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GM, Chrysler Eye Merger
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Published: October 12, 2008
WASHINGTON - General Motors and Chrysler, bruised by the severe industry downturn, have held preliminary discussions about combining operations, including a full-scale merger, according to people familiar with the talks.
It was unclear over the weekend whether talks were progressing and what, if anything, would come as a result.
Spokesmen at GM and Cerberus Capital Management, the private-equity group that owns Chrysler, declined to comment. In a statement, Chrysler said that "the company is looking at a number of potential global partnerships as it explores growth opportunities around the world."
An official at one of the companies with knowledge of the talks said the situation seems to be "fluid" as Cerberus pursues other potential Chrysler buyers. Officials familiar with the talks asked not to be identified because they weren't authorized to be quoted about the discussions.
Both GM and Chrysler have been hit hard by the global credit crisis and pullback in consumer spending. Many consumers shopping for automobiles are having more difficulty getting auto loans. GM's U.S. sales have dropped 17 percent this year; Chrysler's have slumped 25 percent.
GM's share price last week fell to its lowest level since 1950 on fears it will not be able to weather the downturn.
Detroit automakers, including Ford, have been dogged by bankruptcy rumors all year. J.D. Power and Associates said last week that the global auto industry might experience an "outright collapse" in 2009. The New York Times reported Saturday that GM held merger talks in July with Ford but Ford rebuffed GM. Ford officials couldn't be reached Saturday.
The possibility that a dramatic step will be taken to sweep aside Chrysler, an 83-year-old American icon, shows how weak economic conditions could reorder the automotive landscape, analysts say.
A GM-Chrysler merger could also affect the future of GMAC Financial Services, the housing and auto financing division that GM partly spun off to Cerberus in 2006. GMAC has faced enormous difficulty tapping capital markets as other lenders pull back, restricting its ability to lend money to auto dealers, car buyers and homeowners. Cerberus owns 51 percent of GMAC.
A LOOK INSIDE GM, CHRYSLER
GENERAL MOTORS CORP.
ASSETS: GM, founded in 1908, sells its cars and trucks under the Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling brands. It also owns the OnStar network and its Service and Parts Operations. GM owns 49 percent of longtime financing arm GMAC.
EMPLOYEES: About 266,000 worldwide.
CHRYSLER
ASSETS: Chrysler, founded in 1924 by Walter P. Chrysler, owns the Chrysler, Dodge and Jeep vehicle brands, as well as Mopar, a distributor of parts and equipment. Its financing arm is Chrysler Financial.
EMPLOYEES: 66,409 worldwide
Source: The Associated Press
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