A deal to merge General Motors Corp and Chrysler LLC has hit an impasse after the Bush administration ruled out funding for it, three people with direct knowledge of the talks said.
This puts any merger of the struggling automakers on hold until after the U.S. presidential election, the sources said.
The development adds a new element of uncertainty for the embattled U.S. auto industry as Detroit’s political allies warn the sector faces a deepening financial crisis that threatens tens of thousands of jobs.
It also opens the door for Cerberus Capital Management, which owns Chrysler, to restart talks with the Nissan-Renault alliance run by Carlos Ghosn. The private equity firm has seen that option as a backstop to an outright acquisition of Chrysler by GM, one of the sources said.
And a little later on in the same article:
With merger aid off the table, talks about combining GM and Chrysler are on hold until after the November 4 election when the parties hope to sit down with representatives of the new administration, the sources said.
This may mean that the incentive packages that were slated to be distributed on November 5 may be delayed, but I wouldn’t bet on it. But then there is the political aspect that could be a problem for everyone. Again, from the same article:
Democratic presidential candidate Barack Obama told NBC news in an interview he would meet with Detroit automakers and union representatives if elected.
“My hope is if I’m elected, that I’m immediately meeting with the heads of the Big Three automakers as well as with the United Auto Workers,” Obama told NBC. “And to sit down and craft a strategy that puts us on a path for an auto industry that can compete with anybody in the world.”
Republican John McCain’s campaign has said he favors moving to disburse the $25 billion in low-interest loans already approved for the industry as a first step.
All I can say is that if Obama is elected, and later supports a GM/Chrysler merger that costs a significant number of Union jobs, Michigan could turn from a Blue State to a Red State overnight.
Personally, I think that this latest development is good news from the thousands of people that would be affected by a merger. Neither company is bankrupt (yet), and it will be several months before that would happen. A merger, from a personnel standpoint, would be disastrous to Michigan as well as across the country. This leads me to the following thought:
Chrysler’s owner, Cerberus, wants out of the automotive business in the worst way, and does not care how many people will be hurt.
I’ve heard on the radio that several different analysts are disputing the reported benefits of a merger. Numbers of people that would be affected could run close to 100,000 if you count GM & Chrysler workers, dealers, and suppliers. Most would be in Michigan, but those numbers would be spread throughout the country.
Where this will all lead to is anyone’s guess. I’m hoping that I’ll still have a job past the end of the year, and business rebounds quickly.