NEW YORK/DETROIT - A deal to merge General Motors Corp., and
Chrysler LLC has hit an impasse after the Bush administration ruled out funding
for it, three people with direct knowledge of the talks said.
This puts any merger of the struggling automakers on hold
until after the US presidential election, the sources said.
The development adds a new element of uncertainty for the
embattled US auto industry as Detroit’s political allies warn the sector faces a
deepening financial crisis that threatens tens of thousands of jobs.
It also opens the door for Cerberus Capital Management, which
owns Chrysler, to restart talks with the Nissan-Renault alliance run by Carlos
Ghosn. The private equity firm has seen that option as a backstop to an outright
acquisition of Chrysler by GM, one of the sources said.
The sources declined to be named as they were not authorized
to discuss the private talks. GM and Cerberus declined comment.
This week, Ghosn said he sees any deals among automakers
involving a cash element as unlikely unless the cash came from outside, such as
from the government.
Discussions with Nissan-Renault would likely start with
consideration of an expanded product-based tie-up building on an existing deal
between Chrysler and Nissan, the source familiar with those talks said.
A merged GM-Chrysler would be the largest automaker by sales,
but analysts have cautioned it would struggle to turn around the overlapping
Detroit-based operations of two firms that have seen mounting losses tied to a
global downturn.
Chrysler, which has seen its sales fall 25 percent this year, said it was
moving ahead with a cost-cutting plan and with plans for new vehicles, including
a plug-in hybrid. - Reuters
