NEW YORK/DETROIT
(Reuters) - General Motors Corp and Cerberus Capital Management have
resolved the major issues in a proposed GM-Chrysler merger, but the
final form of any deal would depend on the financing and government
support available, sources familiar with the talks said on Wednesday.
Both sides have agreed that GM Chief Executive Rick Wagoner would
lead the combined automaker, the sources said. A merged GM/Chrysler
would be the largest automaker by global sales.
As GM seeks some $10 billion in U.S. government aid to support the
deal, Chrysler owner Cerberus is in its own set of intense discussions
with banks to refinance Chrysler debt, the sources said.
The lending consortium -- which includes JPMorgan Chase & Co,
Goldman Sachs Group Inc, Citigroup Inc and Morgan Stanley -- has not
made a decision yet, and talks are complicated because lenders have
sold part of the debt to other investor groups, the sources said.
The banks hold the first-lien loan of $7 billion issued to finance
the Cerberus buyout of an 80-percent stake in Chrysler from Daimler AG
last year. Banks have been selling off parts of it in an effort to trim
their exposure to risky leveraged buyout debt.
Cerberus and Daimler provided a $2 billion second-lien loan to Chrysler due to weak interest for that debt.
GM has been in talks with Cerberus about buying Chrysler since last
month, but the discussions have been snagged by difficulty in securing
investment or financing at a time when credit is tight and global auto
sales are rapidly declining, others close to the talks have said.
A decision by the Bush administration to provide the government's
first funding for the auto sector since the $1.5 billion bailout of
Chrysler in 1980 has been widely seen as the merger's best chance for
success.
The United Auto Workers union has been approached by GM in the
course of the talks with Cerberus, people familiar with the
negotiations said.
As a condition of government support, GM has offered to merge the
auto operations in a way that protects as many jobs and as much of the
Chrysler sales volume as possible, sources have said.
Analysts have been skeptical that the merged automaker, which would
control some 33 percent of the U.S. market, could be turned around
quickly since GM and Chrysler are seen to be struggling with many of
the same problems, including excess production capacity and too many
dealers.
GM and Cerberus had no comment. A UAW spokesman had no immediate comment.
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