AMERICA'S largest car manufacturer General Motors (GM) is believed to be in merger talks with rival Chrysler after suffering a colossal sales drop – its worst for 15 years.
Talks are understood to have been going on for a month, but details of the deal vary from a merger to an acquisition by GM of Chrysler. The news comes as it emerged that Ford is considering selling its stake in Japan's Mazda. Shares of carmakers in t
he US have plunged on the back of slowing sales and the global credit crunch.
Last week GM's share price fell to near a 60-year low on fears the global financial crisis could derail its turnaround plans.
On Friday Ford chief executive Alan Mulally ruled out a bankruptcy filing, saying that he was focused on its turnaround and managing its cash "very, very carefully" as the market slowdown in the US spreads to Europe and Asia.
The talks are a revival of discussions between Chrysler and GM about a potential merger last year when Germany's Daimler began the process of selling off Chrysler that culminated in a sale of GM to carmaker Cerberus. At the time Rick Wagoner, GM chief executive, said he saw some potential for Cerberus to combine with Chrysler.
Analysts have questioned Chrysler's ability to survive as a stand-alone carmaker, given its reliance on sales to North America for some 90% of its revenue. Both GM and Chrysler have been hurt by their reliance on sales of lorries and large cars and have been struggling to cut union-represented production jobs in reaction to weaker sales.
GM spokesman Tony Cervone said: "Without referencing this specific rumour, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers."
Many analysts now expect further car sales declines in 2009 and some slowing in other regions around the world. GM, which posted a second-quarter loss of $15.5bn, announced plans in July to improve its liquidity by about $15bn by the end of 2009, about two-thirds through cost cuts and the rest through asset sales and new borrowing.
Ford, which posted a $2.7bn loss in the second quarter, went to capital markets to raise more than $23bn in late 2006. It has stepped up plans to convert some truck production in North America to build more fuel efficient cars and bring over European-designed vehicles under a global production strategy.
The full article contains 410 words and appears in Scotland On Sunday newspaper.
