GM Chrysler Merger:Dragging GM and Chrysler to the altar

The two embattled automakers say they can make it as stand alone companies, but government officials might decide the best solution is a merger.

NEW YORK (CNNMoney.com) -- Federal loans kept General Motors and Chrysler LLC out of bankruptcy in December.

Now as both companies try to prove they are worthy of keeping those loans -- and perhaps getting even more -- there are some who think the government might try to bring the two companies together in a corporate "arranged marriage."

Kimberly Rodriguez, head of the global auto practice at Grant Thornton Advisory Services, said that such a deal would make more sense for Chrysler than for GM (GM, Fortune 500), but that it also might be the best alternative for government officials trying to keep as many Chrysler workers and U.S. suppliers on the job as possible.

"It's a better option than Chrysler trying to survive as a stand alone company," she said. "It's not a great solution. But if your solution set is so imperfect, it's not a bad option."

One of the things that derailed merger talks between the two companies last fall was the fact that it would cost more money upfront to combine them than to try to go it alone. Closing excess factories and dealerships and combining operations would cost billions of dollars neither have right now..

Treasury has already loaned the two companies $17.4 billion and the two requested up to $21.6 billion more in the viability plans they submitted to the government earlier this week.

Rodriguez said she thinks the government will at least consider whether it would be better to loan them even more money so they can combine and emerge as a stronger company down the road.

"You have to decide how much money to throw at the thing," she said.

Plans acknowledge merger advantages
Federal officials charged with overseeing the bailout of General Motors and Chrysler LLC met as a group for the first time Friday to start weighing the turnaround plans.

Buried deep within those two 100-plus page plans was the suggestion that the companies might be best off if they were combined into one.

Chrysler went so far as to quote analyst estimates that such a combination could produce between $40 billion to $58 billion in improved profits for the two companies between now and 2016.

The Chrysler plan said that "there exists further benefits from U.S. consolidation but no clear action path with GM." Instead, the company is now focused on trying to complete an alliance it is studying with Italian automaker Fiat.

"We knew we would get asked questions about our earlier discussions related to proposed alliances, so we decided to be very upfront and put it all in the presentation," said Chrysler spokesman Stuart Schorr. But he acknowledged that conceptually, a deal with GM provided Chrysler the greatest cost savings.

GM also says in its plan that it is not pursuing any kind of combination with Chrysler. It also seemed more dismissive of the idea than Chrysler.

"The recent, rapid deterioration in economic conditions have made investment in the up-front costs associated with such consolidations an obviously lesser priority than addressing the immediate restructuring needs of General Motors," the company said in its plan.

But GM spokesman Tom Wilkinson said GM is interested in hearing suggestions from the federal auto task force for the best course for the company to pursue.

"I think there will be some great discussions there," he said. "We want to continue to have this be a constructive process for all concerned."

Both companies have announced plans to shrink further in response to the weaker U.S. auto sales outlook.

Chrysler laid out plans to cut about 3,000 addition U.S. workers, or about 6% of its remaining staff. GM said it plans to reduce its U.S. work force by about 20,000 workers this year, and close five additional plants by 2012, on top of the 12 it had already said it expected to shutter. Each have offered buyouts to all their remaining hourly staff.

And the smaller the two companies get, the easier it might be to combine them, said David Cole, chairman of the Center for Automotive Research.

"You're kind of setting it up to partner with somebody," said Cole.

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Will Obama's Auto Task Force Merge GM and Chrysler?

More talks of the GM and Chrysler Merger. When Chrysler submitted it's viability plan on Tue. 2/17/09 they suggested the best thing for Chrysler was to merge with GM.

GM and Chrysler have talked of working together for years and in November 07 the talks of full blown merger heated up.

Well they are at it again, now the question is "Will the Auto Task Force merge the two companies"?

If this goes down you will know it was all contrived months ago!!!

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GM Chrysler Merger:Chrysler calls GM tie-up 'best option'

Article from The Detroit Free Press-GM Chrysler Merger part of Chrysler's Viability Plan!

Chrysler LLC, which is pushing forward on an alliance with Italian automaker Fiat SpA, said it believes a partnership with General Motors Corp. is still the "best option for the U.S. auto industry."

The comments came in Chrysler's restructuring plan filed late Tuesday with the Obama administration.

In the plan, Chrysler, which has already received $4 billion in federal loans, details its restructuring efforts, which include the elimination of 3,000 jobs and three vehicle models, as well as its request for $5 billion more in federal loans.

But Chrysler's plan also points to consolidation among U.S. automakers as a way to sustain the industry.

GM., which received $13.4 billion in federal loans, did not express that sentiment in its restructuring plan filed Tuesday.

Sen. Bob Corker, R-Tenn., who has been a critic of the domestic auto industry, said it's clear that Chrysler's best option is to partner with another automaker.

"Whether it's with Fiat, or whether it makes sense to talk about GM, a merger is their best chance for survival," he said in an interview with the Free Press.

Chrysler hints at a "strong need for industry consolidation, as it notes a merger with GM would create more value than a standalone Chrysler or Fiat alliance," Barclays Capital analyst Brian Johnson said in a note to investors Wednesday.

The Auburn Hills automaker is clear that the savings from a GM-Chrysler partnership would be at least five times more than what a deal with Fiat would offer.

Chrysler has said that discussions about such a partnership, which gained steam last fall before the two automakers approached Congress for aid, were taken off the table by GM.

But as GM and Chrysler approach the government for more money, decisions about the future might not be in their hands alone. Johnson said he expects government aid will continue, "with perhaps the condition of a merger of Chrysler into GM."

However, Corker said it wasn't clear whether a GM-Chrysler pairing would make sense, given the need for GM to cut jobs, plants and brands.

"If you look at what GM is trying to do, which is simplify, does it make sense to add to it?" Corker said. "It's a question that needs to be asked in light of the changes that have occurred."

A merger between GM and Chrysler would generate at least $36 billion in cash and boost operating earnings by $40 billion, Chrysler said.

Savings would come from combining purchasing power, as well as operations for manufacturing, sales and marketing research and development and corporate staffs.

The prospect of a GM-Chrysler merger met criticism across the Midwest, where one study said the combination would cost 35,000 jobs, including as many as 25,000 jobs in Michigan alone.

Promoting a plan that would lead to thousands of job cuts could be a political landmine.

In its plans to the government Tuesday, GM said it plans to cut 47,000 jobs worldwide this year while Chrysler plans 3,000.

And the tally could rise if either automaker is forced to file for Chapter 11 protection.

"The prospect of losing 25,000 jobs in a consolidation between General Motors and Chrysler seemed outrageous in October. Right now, it seems like the best-case scenario," said Patrick Anderson, principal at the East Lansing-based Anderson Economic Group, which studied the potential merger. But Anderson said amid weak vehicle sales, it would be harder to realize all of the cost savings a merger would ordinarily deliver.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said a Chrysler-GM combination is unlikely. But as the market improves, the two companies could team up to reap at least a portion of the cost-savings a merger would have delivered.

"I'm not convinced that that's off the table forever," Cole said.

Contact JEWEL GOPWANI at 313-223-4550 or jgopwani@freepress.com. Free Press Business Writer Justin Hyde contributed.

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Mum Is the Word From GM and Chrysler-What is Next?

Well the bailout drama is over for another week and there is no news coming from any of the Big Three. People have alot of questions and doubts,just about every plant for the Big Three are shut down. The big question is what plants will reopen and which will remain closed. GM and Chrysler have until March 31st to prove they can survive, which means cut,cut,cut...and still probably merge. 2009 will be a historical year for the American Automotive Companies. Who will survive? Who will Merge?

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Gm Chrysler merger-This is the End Of The Road For Chrysler

GM Chrysler News reported this 2 months ago. The GM Chrysler Merger was and is a done deal! They just need some cash to buy out Daimler and then transfer the 49% of GMAC to Cerberus and GM will Get Chrysler's assets.

I find it amusing all these supposedly automotive experts are surprised that GM Chrysler is talking merger again. Both companies have told us 2 months ago they where going to merge. The only hold up was GM needed more cash! Well guess what, the money will be coming soon.

The auto rescue bridge loan was all part of the plan to facilitate the GM Chrysler Merger!

GM idled 22 factories and Chrysler idled 30,Sadly the workers at GM and Chrysler do not know that some of these plants will never open up again, Especially if the GM Chrysler Merger goes through.

GM Chrysler News-J.F.

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The Car Czar-GM Chrysler Merger-bankruptcy

Under the purposed deal the " Car Czar " will make all the decisions! The "car czar" will have the power to force U.S. automakers into bankruptcy! He will be incharge of distributing the $15Billion as he see's fit! He could also force the GM Chrysler Merger!

This is the Government taking over GM and Chrysler or the New GM Chrysler Company! Stay tuned this is going to get uglier!

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Chrysler News-Hyundai, Chrysler in talks as GM pulls out

DETROIT(Reuters) -- South Korea's Hyundai Motor Co. has had talks with Chrysler LLC owner Cerberus Capital Management LP about a potential acquisition of the U.S. automaker's Jeep brand and possibly other assets, people with knowledge of the talks told Reuters.

The emergence of Korea's largest automaker as a potential bidder for at least part of Chrysler comes a day after General Motors said it shelved its own pursuit of an acquisition of its cross-town rival.

Cerberus also plans to restart talks with other potential partners for Chrysler, including Renault-Nissan, the sources said.


Hyundai has expressed interest in Chrysler's Jeep brand, but Cerberus would prefer to sell all of Chrysler rather than split off assets through a series of deals that would break up the company, the sources said.

Cerberus, Chrysler and Hyundai declined to comment.

Jeep is considered Chrysler's most valuable asset. Although Chrysler has been readying a step that would allow it to sell off Jeep and its supporting parts business readily, any move to dispose of the brand would signal the end of Chrysler as a stand-alone automaker, sources said.

The talks over the future of Chrysler are playing out just as the U.S. auto industry makes its case to U.S. lawmakers for a rescue package for GM, Ford Motor Co. and Chrysler at a time when all three are burning cash faster than ever.

GM, which had been seen as the leading candidate to buy Chrysler, said on Friday that it set aside its pursuit of the acquisition in order to focus on preserving cash.

Bush administration officials last week rebuffed a request for some $10 billion for GM to fund its proposed merger with Chrysler in part, out of concern for the tens of thousands of jobs that would be lost as a result, sources have said.

One advantage of a Hyundai bid is that the Korean automaker would likely opt to preserve more of Chrysler's U.S. operations, and hence keep more jobs, the sources said.

That aspect of the deal could be important because Democratic lawmakers who extended their majority in Congress in Tuesday's election have made it clear that any federal rescue package would be aimed at preserving U.S. manufacturing jobs.

The auto industry and its political allies, including the UAW, are pressing for the current Congress to take up a proposal for another $50 billion low-cost loans for the cash-strapped sector later this month.

SAND "ALMOST' THROUGH THE HOURGLASS

Another source of pressure comes from Chrysler's dwindling cash, people with knowledge of the situation have said.

Without new funding, Chrysler executives have raised concern about the automaker's ability to finance its operations beyond the first half of 2009, according to the sources.

"Things are going to happen pretty fast now because the sand is almost through the hourglass," said one person familiar with the talks.

U.S. sales of Chrysler, Jeep and Dodge brands were down almost 26 percent this year through October, and Chrysler's market share has slipped to just 11 percent in October, putting it in an almost dead-heat with Honda Motor Co. for the No. 4 spot in the U.S. market.

In a breakup of Chrysler, Nissan-Renault might consider buying the automaker's Ram pickup truck production while Germany's Volkswagen is seen as a possible buyer for Chrysler's minivan line, people close to the talks said.

Hyundai, which has 3 percent of the U.S. market, has aspirations to be a full-line auto manufacturer. Based on low pricing and an attention-grabbing 10-year warranty, Hyundai saw sharp growth in U.S. sales earlier this decade.

More recently, it has battled to change the public perception of its brand. Hyundai launched its first luxury model this year and has considered the idea of establishing its own luxury line, like Toyota Motor Corp.'s Lexus.

But a recent round of talks between Hyundai and Ford Motor Co. over a deal to sell Ford's Volvo brand to the Korean automaker sputtered out in a dispute over the value of the brand, sources have said.

Hyundai also had a rocky relationship with DaimlerChrysler before Germany's Daimler AG sold Chrysler to Cerberus in 2007. In 2004, DaimlerChrysler announced it was selling its 10.5 percent stake in Hyundai.

Hyundai has its U.S. headquarters outside Los Angeles, a new $1.1-billion plant in Alabama, and an engineering center near Detroit. Its affiliate Kia Motors Corp. is building a plant in Alabama set to open in 2009.

Hyundai ended the third quarter with 4.5 trillion won, equivalent to about $3.5 billion at the current exchange rate.

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Bob Nardelli & Rick Wagoner Annouce-Gm Chrysler Merger Set Aside, For Now!

Wait a minute, is this the same Gm Chrysler Merger that was dismissed as rumors and speculation by Chrysler Officials last week!

CEO Of GM Rick Wagoner and Bob Nardelli finally tell their workers, investors and all those involved with the auto world that the GM Chrysler Merger is set aside for the short term.

Bob Nardelli-" important at the present time to focus on our immediate liquidity challenges, and, accordingly, we have set aside consideration of such a transaction as a near-term priority"

And Rick Wagoner echoing Bob Nardelli's same statement that" The acquisition of Chrysler is set aside for the short term."

LA Times-
Without naming Chrysler, GM officials today acknowledged that such talks had been pursued but said that they were being put aside for the moment.

"We had explored the possibility" of a merger, Wagoner said. But "we've concluded at this particular time that it's important we put 100% of our emphasis on the liquidity situation."
----------------
Some are reporting that the merger talks are off, they are set aside for now, not off. Analyst knew GM didn't have the money two weeks ago to purchase Chrysler, they need the influx of cash for The Feds.

If GM gets the Federal money it needs it will purchase Chrysler. Cerberus has no intent of staying in the automotive business and would still rather sell Chrysler as a whole.

Until the Federal Government decides to loan them money, it will be a race to shed labor costs, cut projects and close plants.

Don't Think For A Minute Cerberus won't sell Chrysler to GM for more stake in GMAC!

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GM-Chrysler merger appears on hold

Chrysler owner Cerberus Capital Management and GM have been in talks about a merger for weeks, according to people familiar with the talks.

The effort in recent days, however, seemed to be getting in the way of GM’s efforts to secure financial assistance from the federal government. The UAW opposed the idea of a merger that would result in substantial job losses. Industry analysts have predicted a GM-Chrysler merger would result in 30,000 to 40,000 job losses at Chrysler and additional losses through the economy.

While not specifically naming Chrysler, GM said today that “considerations of such a transaction as a near-term priority have been set aside.”

Spokespeople from GM and Cerberus have not been commenting on the talks since they were first revealed publicly about a month ago.

“GM has recently explored the possibility of a strategic acquisition that it believed would generate significant cost reduction synergies and substantially strengthen GM’s financial position in the medium and long term, while being neutral or modestly positive to cash flow even in the near term,” GM’s statement said. “While the acquisition could potentially have provided significant benefits, the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges and, accordingly, considerations of such a transaction as a near-term priority have been set aside.”


In response to GM’s statement, Chrysler issued its own that neither confirmed nor denied that it was part of talks to merger with GM.

“As we have previously stated, Chrysler LLC neither confirms nor discloses the nature of its private business meetings, as many times they do not come to fruition,” Chrysler CEO Bob Nardelli said in a statement.

“Returning Chrysler to profitability continues to be the key focus of the management team,” Nardelli added. “We are significantly challenged by today’s economic environment and by the automotive industry's unprecedented downturn. As an independent company, we will continue to explore multiple strategic alliances or partnerships as we investigate growth opportunities around the world that would aid in our return to profitability.”


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GM and Cerberus Wouldn't Ask For Merger Money!

Both companies know they can not get money to finance a merger from the Federal Government. So they know they have to be creative in the language they use to ask for the bailout loan.

As you listen to the politicians and executives you are hearing multiple terms used to ask for the money like: bailout, loan, bridge loan, viability funding, retiree health care fund, crisis funding,...which is it? and exactly what would the extra 25 Billion Dollars be used for?

AP-
GM has been talking to Cerberus Capital Management LP, the majority owner of Chrysler LLC, about acquiring Chrysler. GM is reportedly seeking Chrysler's $11 billion in cash and federal aid to make the deal happen.

Auto industry officials said the companies do not intend to ask Pelosi for Congress' help in financing a merger. Gettelfinger has expressed concern that a GM acquisition of Chrysler would lead to massive job losses.

What they say and what they do are two different things!

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Will President Obama Talk To Cerberus and GM this week?

Well the Election is over, now President Obama and the Dems face some real serious issues.One of the major issues is whether or not the Federal Government will help the auto industry.

President Obama said he would speak to Cerberus and GM after the election.

One would speculate that with Michigan having a Democratic Governor and a new Democratic President stepping into office the merger will happen. It is just a matter of crafting a financially sound plan from the Federal Governments stand point.
Which means what will the auto companies give in return for large sums of cash?

Many reports rumor to have Cerberus talking to other potential buyers, but Cerberus wants to sell Chrysler as a whole because it would have more value. It is possible Nissan could buy Chrysler and sell off what is doesn't want.

But for Cerberus the sweet deal is with General Motors! It gets the rest of GMAC financing for Chrysler and would swiftly be out of the car business. You don't have to be an accountant, lawyer and auto beat writer to figure that out!

We will probably hear more merger news by the weeks end. This is still a serious problem that needs to be addressed immediately and millions of jobs are counting on some intelligent action.

Here is another Gm Chrysler Merger Report--Researched by Industrial Info Resources

GM-Chrysler Merger Talks on Hold Until After Election, as Bush Administration Won't Finance Buyout

SUGAR LAND--November 4, 2008--Researched by Industrial Info Resources (Sugar Land, Texas)--In-depth talks between General Motors Corporation and Chrysler LLC (Auburn Hills, Michigan) have reached an impasse and will be placed on temporary hold until after the November 4 elections, as the Bush administration has opted not to finance the merger of the two automotive giants. GM and Chrysler had been asking the Bush administration for $10 billion-$15 billion in government aid to help finance the merger; however, that aid was denied late last week.

In the meantime, Cerberus Capital Management LP (New York, New York), the private equity firm that owns the majority of Chrysler, will reopen talks with other potential suitors who may be interested in acquiring the ailing automaker.

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AP Report 11/03/08--Cerberus Waiting For New Prez. To Help Broker GM Chrysler Deal

AP source: Next prez to shape any GM-Chrysler deal

DETROIT: Discussions over potential government funding to facilitate a General Motors acquisition of Chrysler are on hold until after Tuesday's election, and the end result likely will be decided by whoever wins the presidential contest, according to a person briefed on the financing details of the negotiations.

General Motors Corp. and Chrysler LLC were still reviewing numerous options to help the deal, including tapping into a portion of the $700 billion federal bailout being administered by the Treasury Department, the person said Monday.

"I think it's silly for anyone to count anything out," said the person, who asked not to be identified because the negotiations are private.

Another person briefed on the talks said that despite reports to the contrary, Nissan Motor Co. is still involved in the discussions, although Chrysler's majority owner, Cerberus Capital Management LP, would prefer GM as a single buyer.

That person also spoke on condition of anonymity because the talks are confidential.

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Merger Halted? Massive Cuts maybe Coming To Save GM!

Well here we go again! Another wild week of hoping, praying and speculation.Will the employees of GM and Chrysler hear something this week?

The election is one day away and both candidates have agreed on meeting with The Big 3.

Just two weeks ago John McCain wanted nothing to do with the auto industry. Well i think that just may have something to do with Election, what great timing!

Trust me Plan A didn't work (Sell Chrysler to GM) and Plan B Didn't Work(Sell Chrysler to Nissan Renault) There is a Plan C (?)

This month of November General Motors will have record breaking job cuts and Chrysler will expedite it's already planned plant closings. There is no other option unless Federal money is involved.

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UAW hires Girsky as adviser on federal bailout, GM-Chrysler

The UAW has hired veteran Wall Street consultant Stephen Girsky to advise the union on automakers' federal bailout talks and a possible tie-up between General Motors and Chrysler LLC, Automotive News learned today.

Girsky, 46, is a former senior auto analyst with Morgan Stanley who became an adviser to GM CEO Rick Wagoner. He left GM in 2006 after less than a year.
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GM Needs Chrysler Now!

Is a deal already completed with General Motors and Chrysler?

The Detroit News reports that the talks between Chrysler and Nissan have been stopped.

All reports indicate Cerberus wants the complete sell-off of Chrysler LLC, it does not want to part it out.

So the only deal is the GM trade off with Cerberus for Chrysler, GM gets Chrysler and Cerberus get the majority of GMAC.

I would imagine Cerberus may keep a small stake in GM-Chrysler and GM keep a small stake in GMAC.

Another problem that needs to addressed is the German company Daimler owning 19.1% of Chrysler. Does GM pay them off? or are they figured into this massive deal?

However GM needs the cash from the Federal Government now to facilitate a deal and may get desperate in it's attempt to purchase Chrysler.

In the time it took me to update this blog, GM lost $440,000 Buckaroos!

GM is losing $1,000,000,000 a month, ruffly $32,000,000 a day!, $1,300,000 an hour, $22,000 a minute and $366.00 a second!

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Detroit News Reports:Chrysler-Nissan talks halt

Chrysler-Nissan talks halt

No more discussions scheduled after Cerberus acknowledges preference for GM deal, sources say.

Christine Tierney and David Shepardson / The Detroit News

Talks between the Renault-Nissan alliance and Cerberus Capital Management LP have stopped as both sides acknowledged Cerberus's preference to conclude a deal for Chrysler LLC with General Motors Corp., according to sources familiar with the situation.

No more talks between Cerberus and Renault-Nissan negotiators have been scheduled, the sources said Friday, although the parties have not ruled out discussions in the future.

Cerberus and Nissan declined to comment. But sources close to Cerberus have said the private-equity firm favors a GM-Chrysler deal, viewing it as financially more advantageous and also better for the U.S. auto industry.

GM wants to acquire Chrysler if the financing can be arranged, whereas Renault-Nissan had proposed to take a stake of around 20 percent. However, Cerberus and Renault-Nissan negotiators had not agreed on a valuation for Chrysler, which is losing money. Read More.....

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Lastest CNN Report:Treasury says no aid for GM, Chrysler

NEW YORK (CNNMoney.com) -- A merger between U.S. automakers General Motors Corp. and Chrysler is likely on hold until after next week's presidential election, as the U.S. Treasury Department said it will not provide the automakers with aid, the Detroit Free Press reported Friday.

GM had asked the Bush administration and Congress for a loan of about $10 billion to help keep the struggling company operational. It said that it could possibly use the aid to fund a merger between it and Chrysler, which is owned by Cerberus Capital Management.

Many experts have said both companies would need to merge to stop their recent bleeding. GM (GM, Fortune 500) has only about $21 billion in cash and Chrysler has $11 billion, although most of that was borrowed.

GM said Wednesday that overall sales were down 11.4% worldwide in the third quarter compared to the same period a year earlier. With auto sales plummeting globally, analysts say the merger would save the companies billions of dollars in redundant expenses.

But that would also mean tens of thousands of jobs lost. Analysts have estimated that the total job loss in a GM-Chrysler merger could be as high as 90,000.

Furthermore, the Treasury is currently strapped with nearly $3 trillion in Federal bailout and credit liquidity programs aimed at stemming the recent financial crisis gripping the U.S. economy.

After news broke that the government would not provide the companies with aid, the Michigan Economic Development Corp. canceled a meeting of local governments to discuss the possible merger, the Associated Press reported.

The Treasury, GM and Chrysler could not immediately be reached for comment.
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The Fed's Say No To Auto Industry Bailout Merger! What is next for the GM Chrysler Merger?

The Fed's Say No To Auto Industry Bailout! What is next for the GM Chrysler Merger?

The latest rumor is that the Feds might consider a bailout plan that doesn't cause massive job cuts! Possibly a bailout deal created for both car companies would be more practical.

It is now time to see if the Michigan leadership, The Union leadership and automotive brain trust can creatively solve this problem. Anyone can cut jobs to save cost, but as we see the direction the economy is going this is not an option to save Michigan!

The mission is save jobs, save the American auto companies and save the economy of Michigan.
Each problem must be solved in concert with one another, if not it will all fail.

Good Luck!

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GM, Chrysler merger talks on hold after aid hopes fade

By Jui Chakravorty Das and Kevin Krolicki, Reuters

A deal to merge General Motors (GM) and Chrysler has hit an impasse after the Bush administration ruled out funding for it, three people with direct knowledge of the talks said.

This puts any merger of the struggling automakers on hold until after the presidential election, the sources said.

The development adds a new element of uncertainty for the embattled U.S. auto industry as Detroit's political allies warn that the auto sector faces a deepening financial crisis that threatens tens of thousands of jobs.

It also opens the door for Cerberus Capital Management, which owns Chrysler, to restart talks with the Nissan-Renault alliance run by Carlos Ghosn. The private equity firm has seen that option as a backstop to an outright acquisition of Chrysler by GM, one of the sources said.

The sources declined to be named because they are not authorized to discuss the private talks. GM and Cerberus declined comment.

This week, Ghosn said he sees any deals among automakers involving cash as unlikely unless the cash came from outside, such as from the government.
Discussions with Nissan-Renault would likely start with consideration of an expanded product-based tie-up, building on an existing deal between Chrysler and Nissan, the source familiar with those talks said.

A merged GM-Chrysler would be the largest automaker by sales, but analysts have cautioned it would struggle to turn around the overlapping operations of two firms that have seen mounting losses tied to a global downturn.

Chrysler, which has seen sales fall 25% this year, says it is moving ahead with a cost-cutting plan and with plans for new vehicles, including a plug-in hybrid.
"We are taking the tough but necessary decisions to stabilize the business in the short term and making the viable long-term business decisions to restructure the company for the future," Chrysler spokeswoman Lori McTavish said.
GM and Cerberus have been in talks since September.

GM had approached the U.S. Treasury in recent days about support for the merger through some $10 billion in new funding that would have included taking an ownership stake in the merged company, people familiar with the talks have said.
But a Bush administration official said Thursday that the Treasury Department is not negotiating direct aid for the merger.

Instead, the official told Reuters, the administration is working to speed the distribution of $25 billion in low-cost loans for automakers to retool factories, a move authorized by Congress last month.

With merger aid off the table, talks about combining GM and Chrysler are on hold until after the Nov. 4 election, when the parties hope to sit down with representatives of the new administration, the sources said.

A decision by the Bush administration to provide the government's first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 had been widely seen as the merger's best chance for success.

Private investors consulted in the course of the talks have not expressed interest in providing funding for the controversial deal in the absence of government backing, people with knowledge of the talks have said.

In the absence of a deal, Cerberus pushed ahead with a restructuring for GMAC, the money-losing auto finance and mortgage provider in which it owns a 51% stake.
The lender said it was in talks with federal regulators about becoming a bank holding company, which would make it easier to participate in a $250-billion bank recapitalization plan.

GM shares, down 76% since the start of the year, have reacted this week to word of its progress in the merger talks and its lobbying for federal aid. The stock closed down 10% Thursday after the Bush administration official ruled out merger help from the Treasury.

Analysts have challenged the merits of a GM merger with Chrysler. Grant Thornton consultant Kimberly Rodriguez issued a study Thursday estimating that a GM merger with Chrysler would likely cut jobs for up to 40,000 Chrysler workers.
Democratic presidential candidate Barack Obama told NBC news in an interview he would meet with Detroit automakers and union representatives if elected.
"My hope is if I'm elected, that I'm immediately meeting with the heads of the Big Three automakers as well as with the United Auto Workers," Obama told NBC. "And to sit down and craft a strategy that puts us on a path for an auto industry that can compete with anybody in the world."
Republican John McCain's campaign has said he favors moving to disburse the $25 billion in low-interest loans already approved for the industry as a first step.

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Latest From The Detroit News-Investors Are Warming Up To The GM Chrysler Merger

Securing fed aid could pave way for private financing of complex deal.

Christine Tierney and David Shepardson / The Detroit News

Private investors have shown interest in General Motors Corp.'s proposed acquisition of Chrysler LLC and may help finance the deal if the U.S. government agrees to provide funds, sources close to the negotiations said Wednesday.

GM and Cerberus Capital Management LP, Chrysler's majority owner, seek as much as $10 billion in federal loans and other aid to finance a deal.

Outside investors have expressed interest in the deal, but Cerberus is focusing on lining up crucial government aid, said one source familiar with the situation.

In addition to lobbying top Bush administration officials, GM and Cerberus executives have reached out to both presidential candidates to seek support for a deal, sources say.

The government signaled its responsiveness this week, with the U.S. Energy Department moving to speed up the release of $25 billion in low-cost loans that Congress authorized earlier this year for the auto industry.

While a GM-Chrysler combination would lead to thousands more job cuts, the deal is increasingly being presented as the best alternative to the possible collapse of one or more of Detroit's automakers in a rapidly deteriorating environment.

Industry analysts say the U.S. auto market's slump to its weakest levels since the 1980s is forcing the industry to consolidate.

"A merger of some type is likely to occur because the economics now are not sustainable for three separate Detroit automakers," Patrick Anderson, CEO of the consulting firm Anderson Economic Group, said Wednesday.

GM and Cerberus negotiators have made progress in the talks, reaching agreement on some key issues, said sources familiar with the situation.

Cerberus also is in talks with the Renault-Nissan alliance, but the two sides have been unable to agree on a valuation for Chrysler.

Carlos Ghosn, CEO of Renault SA and Nissan Motor Co., has said publicly that automakers are unlikely to take part in deals requiring cash investments during the global credit crunch.

Last week, Daimler AG said it had written down the book value of its remaining 19.9 percent stake in Chrysler to zero.

Cerberus purchased 80.1 percent of Chrysler in August 2007 from Daimler for $7.4 billion, with most of that money going into Chrysler.

But within months, the industry spiraled into a downturn that has grown increasingly perilous for Detroit's automakers. With credit hard to obtain and U.S. consumer confidence at historic lows, some analysts estimate the selling pace slowed this month to its lowest level since 1983.

GM Chairman and CEO Rick Wagoner was in Washington on Friday and Monday warning policymakers of the dire state of the automaker's finances.

GM has lost $18.8 billion in the first six months of the year -- and nearly $70 billion since 2004.

On Wednesday, the biggest U.S. automaker found itself denying rumors that it was seeking help from Japan's Toyota Motor Corp.

Detroit's automakers are asking Washington to double the $25 billion in low-cost loans that were intended to help the auto industry produce more fuel-efficient cars.

They also are trying to position their auto loan financing operations to benefit from the $700 billion bank bailout.

Cerberus owns 51 percent of GMAC Financial Services, which it acquired from GM in 2006, and wants to obtain at least half of GM's 49 percent stake in the lending firm as part of a deal. That would allow GMAC to become a bank holding company eligible for a capital infusion under the bailout plan.

In addition to the difficulties lining up financing in the volatile environment, the deal faces another big hurdle, a GM official said -- winning the backing of the United Auto Workers union.

Without the UAW's support, congressional Democrats might not support a deal.

A source familiar with the situation said GM and other officials have spoken with the presidential candidates, Republican Sen. John McCain and Democrat Sen. Barack Obama, as part of their effort to line up support in the capital.

A spokesman for Cerberus, Peter Duda, said no meetings or conversations involving Cerberus officials took place.

A top adviser to McCain, Doug Holtz-Eakin, told The Detroit News on Wednesday that McCain had not decided whether to support significant government assistance for a GM-Chrysler merger.

The Obama campaign's key auto adviser, Jason Furman, didn't return messages.

"Our priority is to get the $25 billion out the door and make them available," Holtz-Eakin said of the low-cost loans.

Another thorny issue is whether GM will be able to finance a trust fund to be managed by the UAW that was agreed to during last year's labor contract talks to take over retiree health care in 2010. Such a move would save GM $3 billion a year, but requires payments of more than $30 billion to fund it. Some reports have suggested that GM has sought help with its pension obligations from the U.S. Treasury Department.

In addition, Chrysler's estimated $10 billion bank debt must be refinanced in the event of a deal.

Analysts say GM would get access to Chrysler's cash on hand, which totaled $11.7 billion at the end of June.

But the deal has critics who question whether it resolves the big challenges facing GM.

"We do not view the potential for any eventual transaction involving GM and Chrysler -- or any other automaker -- even in combination with government support, as a panacea for these companies' credit concerns," S&P analyst Robert Schulz wrote in a report Wednesday.

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