GM-Chrysler Boards Step On the Merger Gas

17 October 2008

DETROIT: The bankers of cash-hemorrhaging auto giants General Motors and Chrysler are steering their respective boards toward merger, reports this morning's (Friday) Wall Street Journal.

The former, the globe's largest automaker, is flailing to find new sources of funding while struggling to contain a massive third quarter trading loss. Chrysler's new owner, private equity group Cerberus Capital Management, is equally eager to cement a partnership – even marriage.

The [once] Big Guns of banking have been called-in as matchmakers, a role they are enthusiastic to play. According to an 'insider', J P Morgan and Citigroup are beavering in the Chrysler corner, while Morgan Stanley and Evercore Partners represent GM.

However, all lips are firmly zipped as to the progress – if any - the fevered negotiations.

GM, says the WSJ, has the most to gain from a done deal, believing it could yield more than $10 billion (€7.45bn; £5.80bn) in cost synergies; and also enable access to Chrysler's approximately $11bn cash pile.  

Watching anxiously on the sidelines are the carmakers' ad agency networks Omnicom (Chrysler) and Interpublic (GM).

Data sourced from Wall Street Journal Online; additional content by WARC staff