The first reports claiming talks of a merger between industry giants General Motors and Chrysler emerged as recently as a week and a half ago but the latest buzz is that a final announcement could be made within two weeks. USA Today has reported on its website that both companies are looking to wrap up the merger talks before the presidential election on November 4.
The information was revealed by an inside source familiar with the negotiations. They also claim that both GM and Chrysler are lobbying for further government financial assistance to help seal the deal, and that the outcome will depend on whether the costs savings from potential synergies would outweigh the difficulties that come with combining firms with overlapping product lines and vastly different corporate cultures.
Analysts have criticized GM's plans to merge with Chrysler, mostly because of the overlapping of brands and products. The savings, however, are expected to be substantial, and on top of this Chrysler has $11 billion in cash reserves. Most of the cost savings would be generated by consolidating dealer networks and administrative procedures, merging brands and cutting staff.
Currently, Chrysler has around 3,500 dealers while GM has 6,500. Combining the two would result in around 10,000 dealers, resulting in a gross overlap of resources.
Others are less optimistic about the possible merger. GM's current strategy reflects the need to avoid overcrowding various segments, which would conflict with an acquisition of the similarly marketed Chrysler brands.
However, GM is not the only suitor knocking on Chrysler's door, with reports claiming Renault is also considering playing some role in the sale. There remains a distinct possibility that Chrysler could be broken up between Renault and GM.
Meanwhile, Chrysler's current owner Cerberus Capital Management is also nearing a deal with Daimler to purchase the former parent’s 19.9% stake in the company. According to Reuters, any deal done with either GM or Renault would be dependent on Cerberus acquiring the remaining shares of Chrysler. At the same time, Cerberus could also end up swapping Chrysler with GM for the remaining portion of auto-lending firm GMAC, which it already owns a 51% stake and GM the other 49%.
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