Chrysler merger talks on again?
Merger talks between General Motors Corp. and Chrysler LLC are reportedly back on as the automakers try to find ways to survive as they await help from the federal government.
The Wall Street Journal on its website late Wednesday said Chrysler owner Cerberus Capital Management LP restarted the merger talks to demonstrate to Washington that it wants to cooperate in restructuring the industry.
Quoting people familiar with the buyout firm’s thinking, the Journal said Cerberus was willing to give away part of its Chrysler ownership stake to GM. Previous merger talks between the automakers ended just weeks ago.
The Journal speculated that Cerberus also was willing to enter the merger talks to protect its stakes in the financing arms of the two automakers, GMAC LLC and Chrysler Financial.
Earlier in the day, Chrysler extended the holiday shutdown for its plants. All Chrysler plants, including the pickup assembly center in Fenton, will be closed starting late Friday and will restart no sooner than Jan. 19. Last week, the 1,200 workers at Chrysler’s North Assembly Plant, where the Dodge Ram is made, were scheduled for the traditional two-week break from Dec. 22 through Jan. 4.
The change in production schedules will help the automaker conserve cash and adjust its supply at a time when consumer credit is tight, vehicles are staying on lots for longer periods, and sales are lower.
Ford Motor Co. on Wednesday also announced that it would shut down 10 of its North American assembly plants for an extra week in January due to the slumping U.S. auto market. Ford will also extend the shutdown at some engine, transmission and parts stamping plants, or shut portions of them to match production cuts at its assembly plants.
Ford spokeswoman Angie Kozleski says the normal two-week holiday shutdown will be extended to Jan. 12 at all operating assembly plants except those in Claycomo, Mo., near Kansas City, and the Dearborn, Mich., truck plant. Those two plants will return to work as normal on Jan. 5.
GM on Wednesday said it would halt construction of a factory in Flint, Mich., that is set to make 1.4-liter engines for the Chevrolet Cruze and the Chevy Volt plug-in electric car, two future products GM hopes will turn around its fortunes.
All three Detroit automakers have been scaling back — shutting down vehicle production, ending sports sponsorships, idling escalators and cutting back on office supplies — as they await news from Washington.
The Bush administration is trying to find ways by Dec. 25 to provide the automakers up to $14 billion in financing that Chrysler and GM say they need to survive through the first quarter of next year. Ford has said it doesn’t currently need any financing, but if market conditions do not improve, the automaker is expected to seek government help as well.
The financing problem fell to the executive branch last week after a congressional bailout plan died in the Senate.
While Chrysler tries to reduce production costs, the automaker’s credit arm reportedly has told dealers that too much money is being pulled out from accounts that help dealerships finance their inventories.
Dealers put money into cash-management accounts with Chrysler Financial to pay their inventory bills early and reduce interest costs. The finance arm then uses that money to help other dealers pay for vehicles on their lots. Some dealers have been taking money out of their accounts because they’re worried about Chrysler’s future, and that’s putting pressure on the finance division, according to media reports.
Quoting a note by Chrysler Financial Chief Executive Thomas Gilman to dealers on Dec. 12, Bloomberg News reported Wednesday that Gilman said nearly $60 million a day — a "troubling" rate — is flowing from the account, and more withdrawals may "force us to suspend wholesale financing."
Vince Capatosta, owner of All-Star Dodge Chrysler Jeep in Bridgeton, however, said Gilman simply "urged dealers to be prudent about what they’re taking out" of their accounts.
Automakers have been facing difficult conditions since the summer, when skyrocketing gasoline prices drove down sales of highly profitable large vehicles. The situation worsened through the fall as tightening credit markets made it more difficult to arrange financing for operations and all sales of cars.
Canadian autoworkers also are watching developments in Washington. Last week, Ottawa and Ontario announced they would provide the equivalent of 20 percent of whatever emergency aid Washington provides U.S.-based automakers — a figure proportional to the number of GM, Ford and Chrysler vehicles that are produced in Canada.
Angela Tablac of the Post-Dispatch contributed to this report, which includes information from The Associated Press and Bloomberg News.
Filed under: news by Pascal