Major issues resolved in GM-Chrysler talks

[DainBramaged]

I know most here don't give a shit about GM, Ford or Chrysler (while they wax their rice or schnitzels) but this is important to many of us.


General Motors and Cerberus Capital Management LP have resolved the major issues in a proposed GM-Chrysler merger but the final form of any deal will depend on the financing and government support available, sources familiar with the talks said today.

Both sides have agreed that GM CEO Rick Wagoner would lead the combined automaker, the sources said. A merged GM/Chrysler would be the largest automaker by global sales.

Another source familiar with the talks told Automotive News today that the report of agreements on the major issues was not accurate.

The Reuters report was backed up in part by stories published today by the Associated Press and The Detroit News. But other major news outlets had not yet reported the information by 4 p.m. EDT.

As GM seeks some $10 billion in U.S. government aid to support the deal, Chrysler owner Cerberus is in its own set of intense discussions with banks to refinance $9 billion of Chrysler debt, the sources told Reuters.

The lending consortium -- which includes JPMorgan Chase, Goldman Sachs Group, Citigroup Inc. and Morgan Stanley -- has not made a decision yet and talks are complicated because lenders have sold part of the debt to other investor groups, the sources said.

GM has been in talks with Cerberus about buying Chrysler since last month, but the discussions have been snagged by difficulty in securing investment or financing at a time when credit is tight and global auto sales are rapidly declining, others close to the talks have said.

A decision by the Bush administration to provide the government's first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 has been widely seen as the merger's best chance for success.

The UAW has been approached by GM in the course of the talks with Cerberus, people familiar with the negotiations said.

As a condition of government support, GM has offered to merge the auto operations in a way that protects as many jobs and as much of the Chrysler sales volume as possible, sources have said.

Analysts have been skeptical that the merged automaker, which would control some 33 percent of the U.S. market, could be turned around quickly since GM and Chrysler are seen to be struggling with many of the same problems, including excess production capacity and too many dealers.

GMAC ROLE SEEN KEY

One element of the GM-Cerberus talks has involved GMAC, the GM-affiliated finance company in which Cerberus owns a controlling 51 percent stake, people with knowledge of the talks have said.

Cerberus is keen to increase its holding in GMAC and has considered merging it with Chrysler Financial, Chrysler's captive finance company, at a time when the financial firms stand to benefit from new government steps aimed at the tight credit markets, sources said.

GMAC, which has some $20 billion in outstanding debt and has faced a tougher market for its financing, said on Tuesday that it had been approved to borrow through the U.S. Federal Reserve's recently created commercial paper facility.

A U.S. Treasury spokeswoman said on Wednesday that GMAC and other automotive finance companies could sell distressed assets in upcoming auctions to shore up their balance sheets.

S&P IS SKEPTICAL

Meanwhile, credit ratings agency Standard & Poor's said it would continue to monitor the situation.

"It is important to note that we do not view the potential for any eventual transaction involving GM and Chrysler -- or any other automaker -- even in combination with government support, as a panacea for these companies' credit concerns," a statement released by S&P said this afternoon.

"New access to funding could slow the erosion of these companies' liquidity. However, rapid and massive changes would likely be integral to a business combination, raising the possibility of a financial restructuring or strategic bankruptcy filing by one or more of the parties to facilitate such changes. (Managements of both GM and Chrysler insist they will not pursue such strategies.)"

Posted in full (subscription only) http://www.autonews.com/apps/pbcs.dll/article?AID=/20081029/ANA02/810299981/1142


Hemi powered Camaros and Vettes, Small block Jeeps, I love it.

[elepet]

1. GM & Chrysler

Thanks. I heard Obama say tonight that he would help U.S.auto companies retool for more fuel efficient cars, and provide jobs here in the U.S. This sounds like a possible first step. (and GM stock is pretty cheap these days)

[DainBramaged]

4. Ford and GM are great buys right now.

Ford is in a better position to recover and more quickly than GM, they have a big advantage in Hybrids and fuel efficient platforms overseas.

[flvegan]

2. A Hemi in a Vette? Why bring the Vette down?

I support anything that would help American automakers become profitable, creating American jobs, but a Hemi in a Vette? Blasphemy.

:P

[DainBramaged]

3. Welll, think of the possibilities.................

:hi:

[flvegan]

10. I'm a Vette guy

put a (ugh) Dodge engine in her, and I'd walk.

For the money, the ZR1 takes the Viper's lunch. AND, the ZR1 won't gain infamy for catching on fire. That was the Fiero's job.

[DainBramaged]

13. Imagine a GM tweaked V10 in a Silverado instead of a Dodge

The weight difference alone would be worth about 50HP. 650 HP with an Allison 6 speed auto to handle the torque. Massive G force sickness.

[flvegan]

16. Hmmm...

If I wanted that hp in a truck, I'd either take the 5.7 to our buddy Lingenfelter, or I'd revisit a seriously tweaked Cyclone.

But, I digress. Whatever these two companies can and will do to create American jobs and bring profitability back to these companies will thrill me to death.

[IndianaJones]

5. this is bad for us Chevy guys. Chrysler sucks. nt.

[DainBramaged]

9. I ain't givin up on my Chebies, will never own a Corncob

:beer:

[IndianaJones]

11. I can imagine them putting Chrysler trannies in GM vehicles. What a nightmare. nt.

[DainBramaged]

12. The new GM performance 6 speed auto is da bomb, just awesome

in the G8 behin6HP V8. Going to be in the Camaro too.

[IndianaJones]

14. I drive my '94 Olds Cutlass Ciera 100 miles a day...3100 V6....

31 MPG. Beautiful car, beautiful engine. I'll take it over a Honda or Toyota any day. Or a Chrysler.

Its my 3rd 3100. At least 250k on each with routine maintenance.

[FarCenter]

6. How do they solve the dealer problem

Toyota sells half the vehicles of GM + Chrysler. But they have 1/7 the number of dealers.

State franchise laws protect the dealers.

But GM + Chrysler has to see at least half the dealers close in order to have a more efficient distribution network.

Maybe Cerberus can stop the easy credit and force dealers out of business, since they will wind up with GMAC and Chrysler Financial?

[DainBramaged]

8. It is going to be a bitch

In densely populated areas, GM has WAY too many dealers, about one per every 5 square miles, and Chrysler is right in between. GM needs to lose about 25 percent of it's dealers, or make a decision about Buick (sales suck here, #1 in China) and Saturn. Pontiac is even a question in my mind, and GMC is just stupid and bleeds sales from Chevy while selling the same product with different emblems and trim.

In my mind, GM needs to be Chevy, Cadillac, Pontiac, and Chrysler (Jeeps period, ditch the trucks and cars). Chrysler has NO technology worth including in the lineup (except the Hemi and V10 for big ass trucks). And with GM's engines, Jeeps would become even more economical while becoming more powerful. The new V6 in the Equinox sport makes nice horsepower with nearly 30 MPG highway.

[IDemo]

15. Are they seriously discussing engine swaps like this?

Just doesn't seem to fit the business model.

[DainBramaged]

17. What engine would GM want that has captured the public's eye for decades?

http://www.mopartsracing.com/parts/blocks.html

[IDemo]

21. I can certainly understand that they would like to own the Hemi

But would they really replace powerplants in existing GM models, or leverage it into new models? I just don't see it. Corvettes (for example) are making some pretty serious power these days.

[DainBramaged]

22. The Hemi for the aftermarket is a goldmine

especially the crate engine business. Check out the link I posted.

[blue_onyx]

20. I don't know about the brands you would keep

To me, Pontiac would be one of the first brands to dropped. I know it's one of the higher selling brands but it serves no purpose. They're suppose to be "sporty" cars but they're not. GMC should go, especially if GM/Chrysler merge...Jeep would be a better "truck" brand. Buick could be useful if it got better cars. The Enclave crossover did well so I think there's potential for this brand if it gets better car models. Buick won't sell tons like Chevy but profitability, not quantity, should be the most important thing. I like Saturns and, from what I hear, it attracts people who don't usually buy US cars. So I guess I would:

Keep: Chevy, Saturn, Buick, Jeep, and Cadillac.

Drop: Pontiac, GMC, Hummer, Chrysler, Dodge.

But I should say, I don't support a merger. This is just what I think would be good if they did happen to merge.

[IDemo]

7. General Mopar? Has a ring to it..

[blue_onyx]

18. I still don't like the idea of this merger

It bothers me that the government could be funding the elimination of 30,000 Michigan jobs. If we lost that number of jobs, it would be devastating to us. If there's funding, it should be to help them as two separate companies.

[DainBramaged]

19. Let's see what the restructuring does, the UAW is the fly in the ointment

[fujiyama]

23. Chrysler is barely functioning and their cars are for the most part garbage

and while I 'll admit I was taken in a bit by their styling the last few years, they haven't shown any improvements in quality and reliability. To their credit, GM, and especially Ford have made drastic improvements.

GM wants Jeep - that's their main goal here, and this is a nice way to absorb some technical expertise in the Hemi engines, but I think we'll see a ton more plant closings and layoffs. I don't see anything improving in Detroit anytime soon.