October 22, 2008

Renault-Nisan Moves in on Chrysler-GM

The French and Japanese Renault-Nissan alliance has proposed purchasing around 20 percent of Chrysler LLC, sources said.

Cerberus Capital Management, which owns Chrysler, is currently discussing a merger deal with General Motors Corp. But, Carlos Ghosn, chief executive officer of Renault SA and Nissan Motors Co., has revised a Cerberus proposal and sent it back to the firm for review, The Detroit News reported Wednesday.

If the deal is struck, Nissan would purchase the company shares, as Renault is currently carrying more than $5 billion in debt, the News reported.

Although Nissan and Chrysler have agreements in place to build vehicles for one another, Cerberus CEO Stephen Feinberg is said to favor a deal with GM, the News said.

GM could fully absorb Chrysler or establish it as a subsidiary with Cerberus taking a stake in the new company, the News said.

"The key to any deal is the availability of financing to fund present cash burn rates and substantial merger costs," industry analyst Itay Michaeli told the newspaper.