Three weeks ago while the federal government was rescuing AIG and other financial institutions, officers from the Big 3 automakers GENERAL MOTORS, FORD and CHRYSLER were meeting with Speaker of the House, Nancy Pelosi and other members of congress trying to get their own "bail out" from the Federal government. It is now revealed that G. M., desperately seeking to avoid bankruptcy, is looking for a dance partner. They first approached Ford Motor Co. with whispers of merger. Rejected, G.M. has now moved on to that other cute gal CHRYSLER.
G. M. executives approached Ford about a possible merger in July, but Ford rejected the idea and ended the discussions last month, these people said.
After Ford decided to remain independent amid an increasingly difficult auto market, G. M. turned its attention to Chrysler. For the last month, it has been in preliminary merger talks with Chrysler’s owner, the private-equity firm Cerberus Capital Management.
People with knowledge of the talks described the chances of a deal as “50-50.”
The behind-the-scenes maneuvering illustrates the mounting pressure on the Big Three Detroit automakers to solve their enormous financial problems and stave off bankruptcy.
A G. M.-Chrysler merger, if it were to occur, would have a wide-ranging impact on the American auto industry at one of the most critical points in its history.
Both G. M. and Chrysler are losing market share in the United States and burning through billions of dollars in cash while they scramble to revamp their unprofitable North American operations. But they may be running out of time. With auto sales at their lowest level in 15 years, both companies face the possibility of bankruptcy before their turnaround efforts take hold.
“These are not normal times,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. “The biggest problem is cash and whether these companies will have enough to survive this downturn.”
For G. M., which lost $15.5 billion in the second quarter alone, the strategy for survival appears to center on pursuing a mega-merger.
In July, G. M. approached Ford with a proposal to combine the operations of the two biggest American automakers. The talks involved several meetings between G. M.’s chairman, Rick Wagoner; its president, Frederick Henderson; Ford’s executive chairman, William C. Ford Jr.; and its chief executive, Alan R. Mulally, people with knowledge of the process said.
for more, See NY Times Article GM Merger.