December 18, 2008

GM and Chrysler reopen merger talks

Chrysler LLC and General Motors Corp. have reopened merger talks with Chrysler's owner saying it may part with a share of the company, sources said.

Both Chrysler and GM are negotiating with White House and Treasury officials to design a bailout plan as slumping sales have pushed both to the brink of bankruptcy. Both have announced steep production cuts to adjust to slumping sales.

Cerberus Capital Management LP, Chrysler's owner, initiated the discussions with GM, The Wall Street Journal reported Thursday. The two broke off merger discussions just weeks ago.

It is unclear what effect a merger would have on the negotiations in Washington, but it may help convince policy makers the company is serious about its efforts to return to profitability, the Journal said.

The move may also help Cerberus keep its two struggling financial firms, GMAC LLC and Chrysler Financial, the Journal said.

Chrysler has said it needs $4 billion to survive, while GM has asked for $14 billion to see it through to the end of March.

Cerberus, meanwhile, has resisted pressure to supply Chrysler with fresh capital, claiming its charter prevents it from doing so, the Journal said.