Source: Chrysler, GM discuss merger, acquisition

By The Associated Press Published: October 11, 2008
DETROIT - General Motors Corp., Chrysler LLC and Cerberus Capital Management LP have held preliminary talks about a merger or an acquisition of Chrysler by GM, according to a person familiar with the talks.

Chrysler, which is 80.1 percent owned by Cerberus, already has a joint venture with GM making a hybrid gas-electric powertrain, and has discussed a full merger or acquisition with GM, said the person, who did not want to be identified because the talks have not been made public.

The Wall Street Journal, citing people it described as familiar with the discussions, reported that Cerberus, a private equity firm that also owns 51 percent of GMAC Financial Services, proposed trading Chrysler's automotive operations to GM in exchange for GM's remaining 49 percent stake in GMAC.

The New York Times, also citing people familiar with the talks, reported that the automakers were discussing a merger.

GMAC, primarily an auto lender, also has significant mortgage lending operations that have been hit hard by the crisis in that industry.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize because both GM and Cerberus want to quickly divest the assets under discussion.

The negotiations between 100-year-old GM and 83-year-old Chrysler have began more than a month ago. The Times said its sources pegged the chances of a merger being completed at "50-50." "Without referencing this specific rumor, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers," GM spokesman Tony Cervone said in an e-mail.

"The company is looking at a number of potential global partnerships as it explores growth opportunities around the world," Chrysler said in an e-mailed statement issued Friday night.

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