GM looks at overseas funds to finance Chrysler acquisition: report

22 October 2008

Mumbai: General Motors is looking at overseas funds to finance its acquisition of Chrysler LLC, even as executives at both the automakers are pushing for a quick deal, possibly before the presidential election due on 4 November, the Financial Times said in a website report.

General Motors is in talks to acquire Chrysler LLC, which is majority owned by Cerberus Capital Management LP, amidst financial and regulatory obstacles and objection from the United Auto Workers and Canadian Auto Workers unions.

A merger would create an entity controlling about a third of the US light-vehicle market, but it could also affect about 37,000 jobs at Chrysler, more than half of its total of 67,000 workers. Chrysler would then only need workers at its Jeep plants in Toledo, Ohio, and its minivan plant in Windsor.

For GM, which is losing over $1 billion each month, raising money for the acquisition is expected to be a tough job. It cannot borrow money in the market and may need more cash.

GM could close factories and cut jobs, but that also needs cash. GM could be hoping to find a White Knight to rescue it by capital injection similar to recent investments by billionaire investor Warren Buffett in General Electric and Goldman Sachs, the report said.

Cerberus and GM may also approach the federal government for money on the theory that GM would save some Chrysler jobs and keep the feds from having to take on pension obligations.