GM Denies Chrysler Linkup Talks, Auto Stocks Tumble

GM Denies Chrysler Linkup Talks, Auto Stocks Tumble

By Bill Visnic

A day after Chrysler LLC announced it is suspending operations for at least a month at all of its North American assembly plants, General Motors Corp. is denying a Wall Street Journal report saying the two companies resumed merger talks.

Chrysler and GM are awaiting word from the Bush Administration regarding promised emergency funding to carry the automakers into early 2009. Without a loan of billions, both companies have said they may not have sufficient liquidity to continue funding daily operations.

Separate from Chrysler's drastic move to curtail all manufacturing, GM already had announced a major production cutback for the first quarter of 2009 and is delaying other manufacturing spending, including the construction of a plant to build the engine for the high-profile Volt extended-range electric vehicle.

Ford Motor Co., while continuing to say it does not anticipate immediately requiring federal loan assistance, also is cutting cost by extending the length of planned holiday shutdowns at nine North American assembly plants.

The moves all symbolize the varying degrees of desperation gripping the Detroit Three, and Wall Street took note, on Thursday sending GM and Ford shares diving yet again. By mid-afternoon, GM stock was down 17 percent to around $3.60 after enjoying a bailout-expectant rise in the past weeks.

Ford stock was down 12 percent as investors now seem jittery about the latest signs of desperation from GM and Chrysler, in particular, and whether the expected White House-arranged loan might incorporate untenable conditions - or potentially include attributes of bankruptcy.

Former Ford CEO Bill Ford Jr. said earlier this week his company still believes a bankruptcy by any of the Detroit Three will severely affect the surviving automakers and have a detrimental effect on the supplier industry.

But the White House continues to vacillate, with President Bush saying on Wednesday that he still is pondering the appropriate response. Although it was believed the White House would announce its action plan by the end of the week, some media reports suggest a Bush Admin. response may not come until at least this weekend.

PHOTOS:

1. Even GM's high-profile Volt is no longer untouched by the company's deepening financial trouble -- GM announced this week it is delaying construction of a plant slated to build the Volt's small gasoline engine that also will be shared with the Chevrolet Cruze compact car.

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter