Discussions over potential government funding to facilitate a
General Motors acquisition of Chrysler are on hold until
after Tuesday's election, and the end result likely will be
decided by whoever wins the presidential contest, according
to a person briefed on the financing details of the
negotiations.
General Motors Corporation and Chrysler LLC were still
reviewing numerous options to help the deal, including
tapping into a portion of the $US700 billion ($NZ1.2
trillion) federal bailout being administered by the Treasury
Department, the person said on Monday.
"I think it's silly for anyone to count anything out," said
the person, who asked not to be identified because the
negotiations are private.
Another person briefed on the talks said that despite reports
to the contrary, Nissan Motor Company is still involved in
the discussions, although Chrysler's majority owner, Cerberus
Capital Management LP, would prefer GM as a single buyer.
That person also spoke on condition of anonymity because the
talks are confidential.
Nissan spokesman Fred Standish said he would not comment on
speculation about the company's dealings. GM spokesman Greg
Martin also declined to comment.
GM and Chrysler have been holding talks to combine their
operations in order to survive a punishing economic climate,
sliding auto sales and a lack of access to credit for many
consumers.
GM is burning through more than $US1 billion per month and
analysts have said the company could reach the minimum cash
levels required to operate sometime next year. They say
Chrysler could go into bankruptcy next year if it doesn't
take on a partner or isn't acquired by another automaker,
raising the specter of tens of thousands of lost jobs or the
need for the government to take over the company's pension
obligations.
GM has been lobbying the Bush administration for at least
$US10 billion to help the company maintain its operations and
finance a deal with Chrysler. GM could use some of the
funding to shut down redundant Chrysler operations.
Both presidential contenders have discussed support for the
industry. Democrat Barack Obama has said that if elected, he
would quickly meet with the leaders of the US automakers and
the United Auto Workers union after the election. Republican
John McCain has said he would "do whatever I think needs to
be done to help out the auto industry."
GM and its allies in Congress have urged the Energy
Department to expedite the funding of $US25 billion in loans
to help the industry retool assembly plants to build
fuel-efficient vehicles. GM could access a portion of the
funding.
Rep. Dale Kildee, co-chairman of the House Auto Caucus, said
lawmakers were considering doubling the loan funding and
reviewing options that could help the industry.
"We have to put the auto industry in the context of the whole
economy - anything that can be helpful to help the auto
industry will help us sustain the whole economy," Kildee
said.
Industry analysts have speculated that GM would need to
eliminate duplication to swiftly save cash and may be
interested only in Chrysler's minivans and the Jeep brand.
Last week, the governors of six states asked Treasury
Secretary Henry Paulson and Federal Reserve Chairman Ben
Bernanke to take "immediate action" to help the domestic
automakers and protect the financial fortunes of other
industries and jobs connected to carmakers.
Any deal could lead to painful job cuts. An analysis released
last week by Grant Thornton LLP predicted a GM-Chrysler
combination could shutter half of Chrysler's 14 manufacturing
plants and lead to the loss of 12,000 factory jobs and 12,000
administrative ones, some of which already have been
announced. It estimated a loss of an additional 50,000 auto
supplier jobs.
A separate study by the Anderson Economic Group of East
Lansing, Mich., released last week estimated that 25,000 to
35,000 automaker jobs could be cut if a deal is completed,
with most of the losses in Michigan. The analysis found that
the alternative of Chrysler being sold in pieces would result
in many more job cuts than a GM acquisition.
