Friday, November 7, 2008

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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