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GM, Chrysler inch toward deal

2008-12-19 06:48

Detroit - General Motors Corp and Chrysler LLC made significant progress late Thursday on a deal to secure emergency loans as part of a US government aid package, sources familiar with the talks said.

The package would demand sweeping restructuring at the troubled automakers.

Emergency federal loans for the two companies could be announced by the government as early as Friday, according to the sources who were not authorised to discuss the negotiations.

Both GM and Chrysler have been forced to idle plants and lay off thousands of workers as they try to shore up cash and have warned they could face bankruptcy without federal assistance.

The aid package being spearheaded by the White House would demand that both automakers restructure by seeking new concessions from organised labour and creditors, two people briefed on the talks said.

GM and Chrysler have not commented on the aid talks with the Bush administration which have continued over the past week after an attempt to pass legislation to support the industry failed in the US Senate.

One remaining uncertainty is where an emergency federal bridge loan would leave Chrysler, widely considered the weakest of the US automakers.

Chrysler Chief Executive Bob Nardelli said last month the privately held automaker needs both taxpayer-backed loans and an alliance with one or more automakers to survive.

More recently, Nardelli has said the automaker could restructure to emerge as a stand-alone competitor, but most analysts are sceptical of that prospect because of Chrysler's heavy reliance on the deeply depressed US market and its inability to fund new vehicle development programs.

Cerberus Capital Management, the private equity firm that bought 80% of Chrysler from Daimler AG, has retained advisors to study a range of options for the number three US automaker, including selling off its most valuable assets, including its Jeep brand and its minivan line.

Both GM and Chrysler have said a bankruptcy filing is not an option they would choose because of the risk that it would drive more consumers away from their brands.

The Detroit-based automakers have also said a bankruptcy filing by one could topple suppliers and endanger the remaining two companies because of the overlap in their key parts suppliers.

Ford Motor Co is not seeking emergency loans but has asked the government to consider standby credits it could draw on if its own position worsens more than expected in 2009 or if Chrysler or GM were to fail.


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