LeftLaneNews

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.