And the hits just keep on coming...
General Motors Corp. merger talks with Chrysler LLC may intensify this
week as the companies wait to see whether the U.S. will provide
financial aid to help complete the deal, people familiar with the
matter said.
GM and Chrysler LLC owner Cerberus Capital Management LP still support
the combination, and discussions haven't stalled during government
negotiations, said the people, who asked not to be identified because
the negotiations are private.
GM and Chrysler, pressing for an agreement as a slumping economy and a
freeze on auto loans push industry sales toward a 15-year low, don't
expect to make significant progress on government aid until after the
U.S. election, the people said. Combining the companies would require
$10 billion to $12 billion in additional cash to mesh operations,
Citigroup Global Markets Inc.'s Itay Michaeli said in a note to
investors on Oct. 20.
Financing and a union agreement remain the two biggest hurdles for the
merger, people familiar with the talks said. The United Auto Workers
union has hired former GM adviser and Morgan Stanley auto analyst
Stephen Girsky to assist the union in the talks with GM, Girsky
confirmed in an e-mail.
Government loan guarantees might help stabilize the companies, Barack
Obama, the Democratic presidential nominee, said in an interview last
week on NBC's ``Nightly News With Brian Williams.'' Obama leads
Republican Senator John McCain by almost 7 percentage points in the
Real Clear Politics average of national polls.
Overhaul Plan
(and here's where everyone REALLY gets screwed if he wins)
Obama said he would meet with the chiefs of GM, Chrysler, Ford Motor
Co. and the United Auto Workers union to develop a plan for an
industry overhaul should he win the election, according to a
transcript released by NBC.
(the man has under 5 month of experience and he's going to "develop a
plan for an industry overhaul"?!?!?! GIMME A BREAK!!!)
Cerberus has favored an agreement with Detroit-based GM since the
talks started because it would enable the private equity firm to
reduce its exposure to manufacturing, people have said. Secondary
talks with Nissan Motor Co. about an alliance are on hold pending the
GM talks, the Detroit News reported Nov. 1, citing people familiar
with the talks.
(Cerebrus likes the GM option because it's the quickest way to dump
Chrysler!!!0
General Motors rose 4.1 percent to the equivalent of $6.03 in German
trading as of 10:24 a.m. in Frankfurt. The stock dropped 14 percent
over the last two trading days in New York, extending the decline this
year to 77 percent.
GM, Cerberus and Auburn Hills, Michigan-based Chrysler have declined
to comment on their talks. GM has lost almost $70 billion since 2004,
while Chrysler, the third-largest U.S. automaker, indicated its
first-half loss exceeded $1.08 billion. Ford's deficits since 2005
total $23.9 billion.
Low-Interest Loans
Automakers including GM, the biggest in the U.S., are eligible for $25
billion in low-interest government loans to retool plants, while auto
lenders may get funding from the $700 U.S. billion bailout of the
banking system. The companies and their supporters want to speed plans
to dispense the money and ease rules on its use.
GM Chief Executive Officer Rick Wagoner has personally lobbied for aid
to help combine GM with Chrysler, people familiar with the discussions
have said.
GMAC LLC, which is 51 percent owned by Cerberus and 49 percent by GM,
has already succeeded in getting government assistance. The finance
unit was one of several companies that were granted access to the
Federal Reserve's new program designed to ease access to short-term
commercial paper.
GMAC said it is also seeking permission to become a bank holding
company to gain access to more of the federal funds.
Treasury Secretary Henry Paulson wants any funding for GM to come from
the low-interest loans that will be distributed by the Energy
Department, not the banking-system rescue, people familiar with the
matter have said. The Energy Department said last week it is still
writing rules for the loans.
`Parity' for Ford
Ford would expect ``parity'' should federal aid flow to a GM-Chrysler
tie-up, Executive Vice President Mark Fields told reporters Oct. 30 in
Dearborn, Michigan, where the company is based.
GM and Chrysler may also need a new agreement with the UAW for
union-run medical trusts before the money-losing automakers can
complete a merger, people familiar with the matter have said. The need
to negotiate such issues gives the union leverage over the outcome,
the people said.
UAW President Ron Gettelfinger said Oct. 14 in a Detroit radio
interview he wouldn't support a GM-Chrysler merger that eliminated
jobs, a result analysts have said is likely because the two companies
are losing market shares and may have to pare some of their 11 brands.
Accounting firm Grant Thornton predicted last week that 12,000 union
jobs at Chrysler may be eliminated by the merger.
(12,000 jobs @ Chrysler, huh? Imagine that...no talks of massive
firings @ GM though)
Bill M
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