A blockbuster merger between General Motors and Chrysler may have turned the corner toward reality.
GM and private equity giant Cerberus Capital Management, which owns Chrysler, have resolved the major issues associated with a proposed merger of the two auto giants, according to a Reuters report. It warns, however, that the structure of any deal is dependent on available financing and government support.
Reuters did not provide much detail, but pointed out that one agreement in the potential deal provides for GM Chief Executive Rick Wagoner to lead the combined automaker.
Word of the progress in merger talks sent shares of GM surging 8 percent to 10 percent higher amid a healthy move in the overal market, which itself was anticipating a Federal Reserve rate cut this afternoon.
Meanwhile, Cerberus is mired in what Reuters calls intense discussions with banks to refinance $9 billion of Chrysler debt. The lenders include JPMorgan Chase, Goldman Sachs Group, Citigroup Inc and Morgan Stanley.
If GM and Chrysler do merge, it would likely be stark news for the work forces at the two companies. Between 25,000 and 35,000 individuals could lose their jobs, according to the Associated Press, citing consultancy Anderson Economic Group of East Lansing.
However, Patrick Anderson, Anderson’s CEO, said in a conference call with reporters that if Chrysler is sold in pieces, it would result in many more job losses. “It’s a much bigger job loss and a much bigger taxpayer hit if Chrysler simply goes out of business or is dismantled,” Anderson said, according to the AP.
Meanwhile, GM denied an earlier Kyodo news report that Toyota was considering buying up GM’s assets and helping it secure sufficient funds. “As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere,” GM said in a statement that was quoted in news reorts. However, it added that executives “routinely discuss issues of mutual interest” with other automakers.
Third-quarter vehicle sales news at GM continued to be bad, with an 11-percent fall-off for the company worldwide, confirming that growth overseas isn’t offering enough help to lower North American business. The 2.11 million vehicles sold by GM, in the third straight period of lower sales, lowered its competitive rank with Toyota. The leader sold 2.24 million globally, off 4 percent.