GM-Chrysler Deal Said To Be Coming Soon

Person Familiar With Negotiations Says Deal May Be Worked Out By End Of Month

(AP)  Speculation continued to swirl Monday that a deal for General Motors Corp. to buy Chrysler LLC from New York private equity firm Cerberus Capital Management LP could come soon.

Both sides have been talking for months, but the pace recently has increased. A person familiar with the negotiations told The Associated Press Friday that officials were trying to work out a deal by the end of the month.

Cerberus wants out of the auto business. And as the credit markets have dried up, GM, worried about running too low on cash before the U.S. auto market rebounds, wants Chrysler's currency stockpile.

The person said that the talks have advanced to the point where top executives of both companies have looked at a deal and asked for refinements. The person spoke on condition of anonymity because the talks are secret.

In August, Chrysler said it had accumulated $11.7 billion in cash and marketable securities as of June 30. That figure remains around $11 billion, the person said, despite the Auburn Hills, Michigan-based automaker's U.S. sales being down 25 percent in the year through September, the largest decline of any major automaker.

Detroit-based GM is burning up more than $1 billion per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year. GM's sales are down 18 percent, and the company has lost $57.5 billion in the past 18 months, although much of that comes from noncash tax accounting changes.

Chrysler's money pile would help solve GM's cash problem if credit remains unavailable.

Both automakers have had to deny bankruptcy rumors in recent weeks, saying consumers won't buy cars from a company that looks like it could go out of business.

According to the person familiar with the negotiations, the deal being discussed calls for Cerberus to hand over Chrysler in exchange for GM's 49 percent stake in GMAC Financial Services. GM sold a 51 percent stake in its finance arm to Cerberus in 2006.

Cerberus also would get an equity stake in GM, hoping to get a good return should GM recover when U.S. auto sales bounce back from a serious slump.

Other automakers, including the allied companies of Renault SA and Nissan Motor Co., also are in discussions about Chrysler, the person said. Simultaneously, Cerberus, which bought 80.1 percent of Chrysler from Daimler AG in a $7.4 billion deal last year, is negotiating to acquire Daimler's 19.9 percent stake.

GM and Cerberus are still a long way from a deal, according to the person, and GM's board reportedly is cool to the idea.

All that GM, Chrysler and Cerberus have said about the negotiations is that automakers meet all the time. Chrysler Chief Executive Bob Nardelli said Thursday the auto sales drop has created an environment that favors consolidation.

[cjs_cnet_xyz]

Why should Chrysler''s cash pile be used to help shore up GM''s cash shortage? The consumer voted that Chrysler was a better product and Chrysler made money. Why should Chrysler now be scrapped to save GM? Maybe we should have had Lehman Bros. buy J.P. Morgan. Yep, that makes sense don''t it?

[presjfk]

Ohh this is just great. GM is just starting to get its products up to par and now they will join Chrysler that makes the worst cars on the market. Sounds like more disaster in the making.

[generey]

"Cerberus also would get an equity stake in GM, hoping to get a good return should GM recover when U.S. auto sales bounce back from a serious slump."

WHEN U.S. auto sales bounce back??????? Quite a gamble Cerberus, quite a gamble.

[bobnjersey]

[Cerberus wants out of the auto business. And as the credit markets have dried up, GM, worried about running too low on cash before the U.S. auto market rebounds, wants Chrysler''s currency stockpile. ]

ahhh ... if there were a billion dollars in cash at chrysler ... wouldn''t that just make the price a billion dollars higher? who is going to give you cash for less than the current value of the cash? why else would a strugling gm take on more potential issues by purchasing another car manufacturer ... with other gas guzzling cars?