Report: Chrysler still interested in GM merger
Chrysler and General Motors called off their merger talks in November of last year, but a new report indicates Chrysler could once again be entertaining a GM tie-up. Both Chrysler and GM are in difficult financial situations, relying on the U.S. government to provide enough funding to keep their operations up and running.
Per a Bloomberg report, Chrysler has identified a GM merger as its "best option" for survival. Although GM is still opposed to an alliance with its cross-town rival, it remains possible that the Obama administration could force the two into a "shotgun marriage".
"We knew we would get asked questions about our earlier discussions related to proposed alliances, so we decided to be very upfront and put it all in the presentation," Chrysler spokesman Stuart Schorr told Bloomberg.
Although it would seem to reason that adding two negatives would result in an even bigger deficit, there is actually a fairly positive upside to a Chrysler-GM merger. According to Chrysler, a merger with GM would likely bear more fruit than a Chrysler-Fiat alliance. Early estimates suggest a Chrysler-Fiat alliance would improve annual earnings by $7.4 billion, where as a Chrysler-GM alliance would result in an improvement of about $8.3 billion. Annual cash flow would also improve by about $1 billion in a Chrysler-GM scenario.
Moreover, a Chrysler-GM tie-up could also benefit Ford as it would create the Big Two - leaving a bigger piece of the market for the Blue Oval.
However, a Chrysler-GM alliance is still far from a sure bet. Chrysler says it is still committed to its recently announced tie-up with Italy's Fiat, and GM still opposes such a merger. But with options running out on both sides, anything is still possible.