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GM, Chrysler said to be considering partnership

Neither firm confirms the talks. Reports suggest GM would take over Chrysler.

October 12, 2008|Ken Bensinger | Times Staff Writer

General Motors Corp. and Chrysler are discussing possible alliances or a merger, after GM had previously discussed a working alliance with Ford Motor Co., according to two people familiar with the companies.

A partnership between Ford and GM has been discarded for now, but Ford is exploring the possibility of the sale of part or all of its stake in Mazda Motor Corp., according to a third source.

None of these deals is imminent, the individuals said, and anything that does come out of such talks would be weeks or months away.

News of conversations between the automakers broke late Friday, indicating that GM was in negotiations with Cerberus Capital Management, which owns Chrysler, over the fate of the smaller automaker as well as lender GMAC, which is owned 51% by Cerberus and 49% by GM.

Both companies have acknowledged efforts to explore new business opportunities, but neither would confirm specific talks.

"We frequently have conversations with other automakers on subjects of mutual interest," said GM spokesman Tony Cervone. "That is not related to this particular rumor, which we are not, as a matter of policy, confirming or denying."

Chrysler spokeswoman Lori McTavish said: "The company is looking at a number of potential global partnerships as it explores growth opportunities around the world. Beyond those partnerships already announced, however, Chrysler has not formed any new agreements and has no further announcements to make at this time."

Reports on the possible tie-up suggested that GM would take control of Chrysler, providing possibilities of significant cost savings. One possibility also mentioned would have GM trade its 49% stake in GMAC for Chrysler.

A person familiar with GM downplayed the chances of such a swap, suggesting it would be overly favorable to the private equity firm. According to those familiar with the situation, GM had approached Ford to discuss possible strategic alliances, but Ford had decided against such steps.

All spoke on condition of anonymity because they weren't authorized to discuss the matter.

Meanwhile, Ford has been exploring the option of selling part or all of its stake in Mazda, one person said. Ford holds a 33% stake in the company, which unlike Ford is profitable, bringing in $7.2 billion in the second quarter. That person added that a sale of Volvo, fully owned by Ford, is not on the table.

Ford spokesman Mark Truby did not confirm or deny the possibility.

"Our relationship with Mazda hasn't changed," he said.

All three U.S. auto makers have run into financial difficulties amid the economic downturn. Rising fuel prices and sinking consumer confidence have hurt the entire industry.

And for GM, Ford and Chrysler, lineups heavy on unpopular gas-guzzling trucks and SUVs have pushed down sales even faster.

GM sales in 2008 are down nearly 18% compared with last year, Ford sales are off 17% and Chrysler sales are down 25%.

Questions about liquidity have plagued GM and Ford since the spring.

GM is burning through roughly $1 billion a month, eating into its reserves of $21 billion at the end of the second quarter. Ford's cash stockpile was $26 billion at the end of June.


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