Thursday, October 23, 2008

GM-Chrysler push for quick deal

GM-Chrysler push for quick deal
By Sharon Silke Carty and Chris Woodyard, USA TODAY

DETROIT — Negotiators hope to finalize a merger agreement between General Motors (GM) and Chrysler before the presidential election and are lobbying for government financial assistance to help clinch the deal, says a source who has been briefed on the talks.
They are pointing to the impact on the U.S. economy if either company were to fail, compared with the viability of a merged colossus that would control 36% of the U.S. auto market. Those are the chief selling points in asking for government help, says the source, who did not want to be identified because talks are not public.

Cerberus Capital Management, which controls Chrysler, has been pushing to make GMAC, GM's financing arm, a significant part of the deal. Cerberus already owns more than 50% of GMAC but wants it all. The source says that's been a sticking point because GM has said it won't give up its stake.

Talks are expected to continue this week, underscoring the pace at which a fundamental reshaping of the auto industry is taking place.

Ford Motor is seeking to sell all or part of its stake in Japan's Mazda to a group of Japanese companies. The report appeared in the Japanese press last week and was confirmed by two people who have been briefed on the proposal but said they could not comment on the record.

Industry consolidation is being driven by fears of a prolonged recession that has already resulted in plant closings and production cuts. The automakers need cash, and lots of it, to weather the downturn.

Chrysler workers would be vulnerable if the GM deal goes through. GM wants to use Chrysler's $11.7 billion in cash to shut down most of Chrysler's operations while keeping its brands, the source says. GM has been shrinking, too, most recently by trying to sell its Hummer SUV line.

Yet after years of withering, a combined GM and Chrysler could command government attention if the world's largest automaker hits even rockier times. "If they do come together, they really do become too big to fail," says David Cole, chairman of the Center for Automotive Research.

Congress recently approved a $25 billion loan program for Detroit's Big 3 aimed at helping fund development of more fuel-efficient vehicles. It's unclear just what form government assistance might take in a GM-Chrysler deal.

Carty reported from Detroit, Woodyard from Los Angeles

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