WORLD> America
Chrysler, GM have merger talks - sources
(Agencies)
Updated: 2008-10-12 12:18

"On the surface, it frankly doesn't make sense," said Aaron Bragman, an analyst with Global Insight. "The acquisition of Chrysler wouldn't solve any problems GM has and would only make some existing ones worse."

Cerberus declined to comment.

GM declined to comment on whether it had any talks with Chrysler, but said talks with other automakers were a routine part of business. A Chrysler spokeswoman said the automaker was pursuing a number of potential partnerships, but declined to comment specifically on GM.

Any deal would hinge on completion of the sale of Daimler AG's remaining 19.9 percent stake in Chrysler to Cerberus, two of the sources said. Cerberus last month said it had approached Daimler to buy that stake.

A Daimler spokesman could not be reached for comment.

Global Insight's Bragman said unloading Chrysler would benefit Cerberus since the private equity firm would end up with GMAC just as a $700 billion US government bailout fund to buy distressed debt begins operations.

"They would get rid of an auto company that has weighed on their results, and they would get full control of GMAC just as the government is about to come to the rescue," Bragman said.

Back to the Table

Talks between GM and Chrysler revive discussions about a potential merger that started in early 2007 when Daimler began the process of selling off Chrysler. Later that year Chrysler was sold to Cerberus.

GM Chief Executive Rick Wagoner also said last year that he saw some potential for Cerberus to combine GMAC with Chrysler Financial, the finance company affiliated with the automaker.

Analysts have questioned Chrysler's ability to survive as a stand-alone automaker, given its reliance on sales to North America for some 90 percent of its revenue.

A deal to sell Chrysler would clearly benefit Cerberus, said Gerald Meyers, a professor at the University of Michigan business school and former auto executive.