GM Chrysler Merger Talks Reported

Just yesterday. General Motors continued its freefall in the economy, with the lowest stock prices for the company in over 50 years. The automotive giant was already in rough times, but recent days have made GM even more vulnerable. But it is a fellow car giant, Chrysler, that may be in even more dire straits. Despite GM's struggles, there is talk that GM could merge with or even buy out Chrysler, as the Wall Street Journal reports of merger talks over the last several days.

Chrysler is owned by Cerberus Capital Management, which controls 80.1% of the company. It also owns 51% of the automotive lending company GMAC, while GM owns the other 49%. Cerberus was reported to have proposed to trade its stake in Chrysler to GM, while Cerebus would receive GM's stake in GMAC in return.

GM and Chrysler are two of the notorious "Big Three" in the automotive industry. But this industry, like many others in recent months and years, has had its value decrease due to the economic turmoil in the United States. The 100-year-old GM and the 83-year-old Chrysler would shake up the entire industry even more with a merger, though in less than ideal circumstances.

Cerberus is only a year removed from purchasing a controlling interest in Chrysler, and two years removed from buying 51% of GMAC. Yet the private-equity firm is already looking to sell both.

According to sources that talked to the Wall Street Journal, the merger negotiations between GM and Chrysler began over a month ago, before the most recent crashes in the stock market. However, these economic troubles and the falling prices of both GM and Chrysler stock have put talks of a merger on hold. As soon as markets stabilize, however, the merger talks between GM, Chrysler and Cerberus may resume.

GM and Chrysler were close to a possible merger last year until Cerberus bought out most of Chrysler. GM was also in brief talks to merge with Ford in 2005.

Chrysler sales went down 33% in September, while GM sales went down by 16%. Sales of automobiles as a whole in the United States are down 13% this year.