As rumours swirl that General Motors (GM) is in talks with both Chrysler and Ford to secure some form of tie-up, the manufacturer is said to be campaigning hard to receive its share of the US “green” funds as soon as possible to help it complete a transition to become a manufacturer of green cars.
The funds, which were approved by the US House of Representatives last month, have yet to be forthcoming and with GM in the middle of a cost-cutting, asset-shedding programme aimed at freeing up around $15 billion to part-fund the manufacturing of smaller vehicles, it is desperate to receive its share of the cash.
GM is said to be exploring various options regarding its future, including entering into talks with Chrysler’s private equity owner Cerebus. These talks however, are said to have stalled due to the worsening of the economic situation and the difficulty in finding the billions that would be needed to fund a deal.
The company was also said to have spoken to Ford earlier this year about some form of merger, although nothing has come from the talks.
Ratings agency Standard & Poor’s has said that it was keeping GM and financing arm GMAC on review for a possible downgrade in spite of the reported talks.
Another option may be that the US Government takes an equity stake in a combined GM and Chrysler company, similar to that taken by the administration in 1979 during Chrysler’s recapitalisation. If a GM-Chrysler merger is forthcoming it will rely on a huge level of capital that is currently not materialising due to the state of the debt markets.
