Chrysler May Still Be Up for Merger With GM

Owner Cerberus Reportedly Made Move to Restart Talks

By Published on .

DETROIT (AdAge.com) -- Might General Motors Corp. and Chrysler merge after all?

Executives for both sides denied the negotiations until early this month, when GM CEO Rick Wagoner (left) and Chrysler CEO Robert Nardelli testified in Washington before the Senate Banking Committee in hopes of securing federal loans.
Executives for both sides denied the negotiations until early this month, when GM CEO Rick Wagoner (left) and Chrysler CEO Robert Nardelli testified in Washington before the Senate Banking Committee in hopes of securing federal loans. Credit: AP
As the lame-duck Bush administration tries to hammer out a plan for emergency federal loans to GM and Chrysler, the prospect of a merger between the two automakers was raised again today by The Wall Street Journal. The paper reported that Chrysler's majority owner, private-equity firm Cerberus Capital Management, has again approached GM about a potential pairing.

A GM spokesman told Advertising Age the auto giant had not restarted talks with Chrysler about a possible merger, although he did not know whether Cerberus had contacted GM on the matter. Cerberus did not immediately return calls.

'Last thing GM needs'
Not everyone is thrilled with the idea. "The last thing a company with cancer needs is another infection," said an industry veteran. "GM would be wise to get on with fixing their broken business in North America and get well."

Cerberus, which holds a majority stake in Chrysler, initiated negotiations with GM a few months ago, proposing the larger company trade its remaining 49% stake in financing unit GMAC for an unspecified share in a merged GM-Chrysler. (GM sold a 51% stake in GMAC to Cerberus in 2006.)

During round one of the merger talks, executives for both sides denied the negotiations until early this month, when GM CEO Rick Wagoner and Chrysler CEO Robert Nardelli testified in Washington before the Senate Banking Committee in hopes of securing federal loans.

CEOs 'willing to look at this'
Sen. Robert Bennett (R-Utah) asked the two CEOs whether they would merge their companies if it was a condition of getting the loans, and both men were somewhat positive in their responses. Mr. Wagoner said GM would "be willing to look at this on its merits." Mr. Nardelli said such a deal would result in annual savings of between $8 billion and $10 billion to the merged business, and that he'd gladly be the first to leave the automaker if such a merger would save Chrysler.

The first time around, most auto experts were scratching their heads about a GM-Chrysler marriage, saying it made no sense in terms of vehicle brands, U.S. production and dealers.

In this article:
Most Popular