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    General Motors, Chrysler ask $10 bln aid from U.S. gov't for merger

    HotNewsTurkey with wires
    28.10.2008 - 09:37 | Son Güncelleme: 28.10.2008 - 13:52

    General Motors and Cerberus Capital Management have asked the U.S. government for an unprecedented $10 billion rescue package to support a merger between GM and Chrysler LLC, Reuters reported citing sources with direct knowledge of the talks.

    According to Reuters, the U.S. Treasury Department is considering a request for direct aid to facilitate the merger and a decision could come this week, sources familiar with the still-developing government response said earlier on Monday.

     

    GM and Chrysler's majority owner, Cerberus Capital Management LP, have been negotiating a complex deal in which GM would end up owning its smaller Detroit rival, but the parties have struggled to line up financing, Wall Street Journal also reported.

     

    The combined entity would need about $10 billion in new equity to cover the cost of laying off workers, closing plants and integrating the two companies, say people involved in the talks, WSJ said.

     

    GM has been in talks with Cerberus about buying Chrysler since last month but the discussions have been snagged by difficulty in securing investment or financing for a deal at a time when credit is tight and global auto sales are in rapid retreat, others close to the talks have said.

     

    A decision by the Bush administration to provide the government's first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 has been widely seen as the merger's best chance for success.

     

    "The automakers are facing a maelstrom and that's why I think an unprecedented government infusion could happen," Efraim Levy, an automotive equity analyst with S&P, told Reuters.

     

    The government funding would include roughly $3 billion in exchange for preferred stock in a merged automaker, according to one of the Reuter's sources, who was not authorized to discuss the matter publicly.

     

    An injection of $3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top U.S. automaker.

      

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