Saturday, November 8, 2008
GM's efforts to merge with Chrysler put on hold for now
BY TIM HIGGINS • FREE PRESS BUSINESS WRITER
General Motors Corp.'s increasingly dire situation led the Detroit automaker to say Friday that it is setting aside efforts to merge with Chrysler LLC to focus on saving its existing operation.
GM had been pursuing a deal to acquire Chrysler while also asking for help from the federal government to weather the financial turmoil roiling the auto industry.
GM's decision opens the door for other automakers to look at a deal for Chrysler -- with Renault-Nissan potentially reemerging in that scenario -- although Renault-Nissan's chief executive has indicated a reluctance to spend in this economic climate.
GM announced Friday that it burned through $6.9 billion in cash during the third quarter, leaving its reserves critically low. Overall, the world's largest automaker has lost $21.3 billion over the first nine months of this year.
"While the acquisition could potentially have provided significant benefits," GM said in a statement, "the company has concluded that it is more important at the present time to focus on its immediate liquidity challenges and, accordingly, considerations of such a transaction as a near-term priority have been set aside."
Gov. Jennifer Granholm said she was pleased to learn that the GM-Chrysler talks were off.
"I think everyone is leery about providing a bridge loan" from the federal government "to see a merger that would result in job losses," she said. "I don't think that's something that there's great desire to do, understandably. So, I'm hopeful that there is another way to go about having a robust auto industry."
Aaron Bragman, an industry analyst with IHS Global Insight, said the decision raises big questions about Chrysler, which is owned by Cerberus Capital Management.
"What are Cerberus' options now?" he said. "Is it bankruptcy? Is it selling it off to somebody else now? I don't think that just because GM decides not to buy that Cerberus doesn't still sell it."....More
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