GM, Cerberus Still Talking About GM-Chrysler Combo
By Michelle Krebs October 29, 2008By Michelle Krebs
General Motors and Cerberus Capital Management continue to talk about a GM-Chrysler merger with some significant issues remaining on the table, sources tell Edmunds' AutoObserver. Among them are issues relate to United Auto Workers union, which is being asked to make some concessions but has not yet agreed to them.
Meantime, Reuters news service, quoting unnamed sources, is reporting the two sides, in fact, have resolved the major issues in a proposed merger, though the final deal is dependent on financing and government support.
Reuters also picked up a story out of Japan that claims GM is expected to ask for Toyota's help in turning around its business, Kyodo News reported on Wednesday, citing sources familiar with the plan. An AutoObserver source suggested the report is overreaching.
Reuters reportsGM and Cerberus agreeing that GM CEO Rick Wagoner would lead the combined automaker.
Still, the merger dealer is dependent on financing the effort. The GM-Chrysler lending consortium -- which includes JPMorgan Chase, Goldman Sachs Group, Citigroup Inc and Morgan Stanley -- also has not made a decision yet, the newswire reports. Talks are complicated because lenders have sold part of the debt to other investor groups, sources told Reuters.
In addition, GM reportedly is seeking some $10 billion in U.S. government aid to support the deal. And Cerberus, Reuters reports, is in its own set of intense discussions with banks to refinance $9 billion of Chrysler debt. Chrysler reported it has $11.7 billion in cash on hand in June; sources tell AutoObserver that amount is estimated to have dwindled to about $6 billion.
Meantime, the Kyodo reported Wagoner was considering visiting Japan soon, something he routinely does, and meeting with Toyota's leadership to discuss the plan. The Kyodo news report said Toyota was expected to consider quick fixes for the cash-strapped GM, including buying up its assets and helping it secure sufficient business funds.
The Kyodo report speculates the executives of the world's two biggest automakers may also discuss an expanded business partnership, including Toyota, which leads in hybrids with the Toyota Prius, making fuel-efficient compact cars for GM and providing hybrid-car technologies to the U.S. carmaker. GM is focusing the bulk of its resources and efforts on development of the range extending Chevrolet Volt.
Both Toyota and GM sources denied Kyodo's speculation.
Toyota and the Japanese government are known to be fearful of the political ramifications that the demise of one or more of Detroit's automakers might have on Japan-U.S. trade, Japanese automakers and specifically Toyota.
Wednesday morning, GM reported its global sales for the third quarter. The U.S. automaker fell further behind Toyota for the No. 1 sales spot in the world.GM sold 2.11 million vehicles in the third quarter, a drop of 11 percent. Toyota sold 2.24 million, a 4-percent decline. For the first nine months of the year, Toyota, at 7.06 million vehicles sold, is ahead of GM's 6.66 million vehicles sold.
A GM-Chrysler combo would catapult GM to the No. 1 spot it has held for more than seven decades.
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