GM, Chrysler Talks Heat Up

Source Says Chrysler Owner Has Retained J.P. Morgan

Merger discussions between General Motors and Chrysler appear to be picking up some speed.

Cerberus Capital Management, which owns 80 percent of Chrysler, has hired lender J.P. Morgan Chase as its representative, said a person close to the situation who was not authorized to speak publicly.

The Wall Street Journal reported that Morgan Stanley and Evercore Partners are representing GM.

Chrysler has repeatedly said it has been in talks with multiple parties, not just GM, about partnerships and alliances. On Thursday, Chrysler chief executive Robert Nardelli told CNBC that slumping auto sales have spurred industry consolidation.

"It certainly creates an environment for consolidation where you can get synergies of productivity that will allow you to be more competitive, not only here in the U.S. market, but on a global basis," he said.

GM put out a statement saying that it routinely discusses "issues of mutual interest with other automakers. As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere." GM has already said it would explore the sale of its Hummer sport-utility vehicle line.

GM shares rose as high as $6.76 before the market open on reports that talks had accelerated. The stock closed at $6.43, up just 3 cents from the day before.

It's unclear whether the talks would lead to a formal merger or some other sort of alliance. Jim Hall, managing director of 2953 Analytics, a Birmingham, Mich., industry analysis firm, said a platform- or component-sharing agreement would be likely in a bid to trim costs.

While other analysts say GM could absorb Chrysler entirely, many voiced skepticism, saying a traditional merger might make matters worse for the two money-losing automakers. GM posted a $15.5 billion loss in the second quarter.

Michael Robinet, vice president of global forecast services for CSM Worldwide, said the overlap between the two companies would create an operational disaster for manufacturing and dealerships.

"There's not a lot of complimentary capabilities of these two companies," he said. "Their footprints for distribution and workforce in North America are pretty close. One's just smaller than the other."

Robinet predicted it would take several years for the automakers to realize any benefits from a merger.