General Motors Corp is in preliminary talks with Cerberus Capital Management LP’s Chrysler LLC about a possible merger or other partnership, a person familiar with the talks said.
The talks are very early and it’s not clear whether they will result in any agreement, the person said, who asked not to be named because the discussions are private.
The New York Times reported the talks on Friday and said Cerberus is also holding talks with automakers including Nissan Motor Co and Renault SA, citing unidentified people.
Cerberus spokesman Peter Duda did not return phone calls. Chrysler spokeswoman Shawn Morgan had no immediate comment. GM spokesman Tony Cervone also had no comment.
GM, which hasn’t made money since 2004, and Chrysler, which has said it won’t be profitable this year, are under pressure to cut costs and increase liquidity as US auto sales have fallen to the lowest level since 1991 and the credit crunch, touched off by the bankruptcy of Lehman Brothers Holding Holdings Inc, is making it harder for customers and dealers to get loans.
Cerberus said last month that it was trying to buy the 19.9 percent of Chrysler that is still owned by Daimler AG.
Chrysler LLC said on Sept. 25 it would fire about 250 employees as part of a plan to eliminate 1,000 salaried positions by the end of last month.
Daimler wrote down the value of its Chrysler stake from US$1.2 billion at the end of last year to US$231 million at the end of June as the automaker’s fortunes declined.
Chrysler, which isn’t required to report financial information, has said it won’t be profitable this year. The company said that through June, it earned US$1.1 billion before interest, taxes, depreciation and amortization.
Standard & Poor’s analyst Robert Schulz said on Friday that GM, Ford Motor Co and Chrysler may be forced into bankruptcy as the global credit freeze damps US sales.
“Macro factors could overwhelm them at some point” even as GM, Ford and Chrysler vow to stick with their turnaround plans, Schulz, Standard & Poor’s lead automotive credit analyst, said in a Bloomberg Television interview in New York.
The companies said they have no plans to seek bankruptcy protection.
With all three companies working to boost cash, any bankruptcy filing would be a last resort, not a “strategic” decision, Schulz said.
“We don’t see that as something they would choose,” he said.
Schulz said the “trigger” for a forced restructuring under bankruptcy protection would be based on the automakers’ ability to preserve liquidity as sales decline. Industrywide US sales slid 27 percent last month, the most in 17 years.
“With auto sales stalled in the US and beginning to contract in the rest of the world, we believe GM’s cash needs are increasing,” Barclays Capital analyst Brian Johnson in Chicago wrote in a note on Friday. “Moreover, the downside risk of greater decline in worldwide auto sales driving greater cash needs is increasing.”
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