Tuesday, February 20, 2007

GM in preliminary talks to buy Chrysler: source

GM in preliminary talks to buy Chrysler: source
Fri Feb 16, 2007 12:58 PM ET
By Megan Davies and Kevin Krolicki





NEW YORK/DETROIT (Reuters) - General Motors Corp. is in preliminary talks to buy Chrysler, a source familiar with the situation said on Friday.

The talks were first reported by the trade journal Automotive News. GM and Chrysler parent DaimlerChrysler AG declined to comment on the report.

Shares of DaimlerChrysler rose in reaction to the report. GM shares slipped at first but then moved higher.

Automotive News, citing unnamed sources in Germany and the United States, said the companies were engaged in high-level talks about GM buying Chrysler Group in its entirety.

The source who spoke to Reuters, however, said it was questionable whether GM would want Chrysler's finance business, having recently sold its own finance arm.

Speculation surrounding a possible sale or spinoff of Chrysler has built since DaimlerChrysler Chief Executive Dieter Zetsche said earlier this week that all options were open for its struggling North American unit.

DaimlerChrysler shares were up 3.5 percent to $72.72 in midday trading on the New York Stock Exchange. GM shares were up 19 cents at $36.63.

Analysts have questioned whether GM would benefit from a merger with Chrysler, since both automakers are struggling with excess production capacity, sliding sales and a heavy exposure to trucks and sport utility vehicles.

David Feinman, a fund manager who specializes in distressed debt with Havens Advisors, said he doubted that GM would complete a deal to buy Chrysler.

Feinman, who does not own GM debt, said both GM and Chrysler have too many overlapping models, and any merger would have to result in even deeper cuts to jobs and output.

"If they do merge, there would have to be massive streamlining and there would be hundreds of thousands of more jobs loss," he said.

He added, "The only one to benefit would be Daimler because they would get rid of Chrysler."





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