Ford Motor Co. disclosed yesterday that it has rejected a secret offer to merge with Chrysler Corp., forcing Chrysler to look overseas for a potential partner.
The suggestion of combining Ford and Chrysler into a joint venture big enough to rival General Motors Corp. was made a few days ago by executives of Salomon Brothers, the New York investment firm hired to help solve Chrysler's financial woes.
Ford's board unanimously rebuffed the feelers on Thursday, then yesterday made the offer public in what spokesman said was a deliberate attempt to scotch speculation about the possible merger.
Chrysler officials said Ford was approached because the government had encouraged the company to pursue "all possibilities for potential joint ventures or mergers."
When Chrysler got its latest $400 million governemnt-guaranteed loan earlier this year, then-treasury secretary G. William Miller advised the troubled auto maker to look for a private partner rather than count on the government to come up with more money on top of the $1.2 billion in guarantees it has already given.
"We have no direct discussions with Ford concerning a merger," a Chrysler representative said. "A representative of Chrysler asked for an expression of interest on their part. They responded negatively."
Wendell Larson, Chrysler vice president for public affairs, said the company will make similar approaches to "every auto maker in the world except one" -- General Motors, which is already so big that government antitrust lawyers would likley block any deal.
James Wolfenson, the Salomon Brothers executive in charge of Chrysler who tried to broker the marriage with Ford, was out of the country yesterday, and other officials of the investment banking firm would not comment.
Ford Chairman Philip Caldwell said the board "unanimously determined that a merger or other similar arrangement with Chrysler should be rejected as clearly not being in the best interest of Ford or its stockholders."
Ford's top executive reportedly recommended that the board not pursue the Chrysler initiative, arguing that Ford could find better ways of solving its own troubles than tying itself to the ailing Chrysler. Ford disclosed on Thursday that it expects to report a loss of $316 million in the first quarter of 1981 on top of losses of $1.5 billion last year.
Auto analyst Arvid Joppe of John Muir & Co. said yesterday he estimates that Chrysler lost another $275 million in the first three months of 1981, bringing its total losses to more than $3 billion.
Joining forces with a foreign auto maker is a more promising way for Chrysler to return to profitability than joining up with Ford, Joppe said. "Chrysler has to do it on its own," he said, "The intent of the loan guarantee was not to worry Chrysler into becoming a division of Ford Motor Co."
The argument for combining the two firms is that between them, Ford and Chrysler produce a diversified assortment of small cars that could compete with General Motors and the Japanese imports. Given Chyrsler's highly successful K-cars and Omni/Horizon plus Ford's "world cars," the Escort and Lynx, and its brand new EXP and LN7 two-seaters, the two have an array of salable small cars.
On the other side of the ledger are the risks of merging two companies when both are in trouble, the difficulties of combining their competing dealer networks, and the longstanding animosities between Henry Ford II and Chrysler Chairman Lee Iacocca, who was fired by Ford.
Chrysler previously offered to sell its British and European operations to Ford, but Ford did not want them. Ford is on the verge of completing an agreement with Toyota to build vehicles in the United States, probably starting with small vans.