GM in talks with Chrysler, Ford

11 October 2008

The Wall Street crisis has finally found its way to Motown, that could well see the Big Three become the Big Two, with reports saying that General Motors has been in preliminary merger talks with private equity firm Cerberus Capital Management that owns a 79-per cent stake in rival Chrysler, for a possible deal.

A deal betwen the two could reshape the US auto industry, reducing the number of heavy weights in the industry from three to two.

GM's discussions have been on for around a month with Cerberus Capital Management LLC, which also owns 51 per cent in GMAC, an 89-year-old auto lender.

The Wall Street Journal reported that Cerberus has proposed a swap in which GM would acquire Chrysler's automotive operations, while it would in turn give the remaining 49 per cent stake of GMAC to Cerberus.

Last month Cerberus was reported to have approached Daimler AG for acquiring the remaining stake in Chrysler. Daimler still holds around 19.9 per cent in Chrysler, after it sold 80.1 per cent to Cerberus over a year ago. Daimler' had acquired Chrysler in 1998 for $36 billion. The German Manager- Magazin had reported that Daimler would like to offload its Chrysler stake in the coming weeks.

Daimler had issued a statement confirming that it was in discussions with Cerberus ''regarding the redemption of its remaining 19.9-per cent stake in Chrysler LLC.''