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SOURCE: Detroit News

Thursday, October 30, 2008
Investors warm up to GM-Chrysler
Securing fed aid could pave way for private financing of complex deal.

Christine Tierney and David Shepardson / The Detroit News

Private investors have shown interest in General Motors Corp.'s proposed acquisition of Chrysler LLC and may help finance the deal if the U.S. government agrees to provide funds, sources close to the negotiations said Wednesday.

GM and Cerberus Capital Management LP, Chrysler's majority owner, seek as much as $10 billion in federal loans and other aid to finance a deal.

Outside investors have expressed interest in the deal, but Cerberus is focusing on lining up crucial government aid, said one source familiar with the situation.

In addition to lobbying top Bush administration officials, GM and Cerberus executives have reached out to both presidential candidates to seek support for a deal, sources say.

The government signaled its responsiveness this week, with the U.S. Energy Department moving to speed up the release of $25 billion in low-cost loans that Congress authorized earlier this year for the auto industry.

While a GM-Chrysler combination would lead to thousands more job cuts, the deal is increasingly being presented as the best alternative to the possible collapse of one or more of Detroit's automakers in a rapidly deteriorating environment.

Industry analysts say the U.S. auto market's slump to its weakest levels since the 1980s is forcing the industry to consolidate.

"A merger of some type is likely to occur because the economics now are not sustainable for three separate Detroit automakers," Patrick Anderson, CEO of the consulting firm Anderson Economic Group, said Wednesday.

GM and Cerberus negotiators have made progress in the talks, reaching agreement on some key issues, said sources familiar with the situation.

Cerberus also is in talks with the Renault-Nissan alliance, but the two sides have been unable to agree on a valuation for Chrysler.

Carlos Ghosn, CEO of Renault SA and Nissan Motor Co., has said publicly that automakers are unlikely to take part in deals requiring cash investments during the global credit crunch.

Last week, Daimler AG said it had written down the book value of its remaining 19.9 percent stake in Chrysler to zero.

Cerberus purchased 80.1 percent of Chrysler in August 2007 from Daimler for $7.4 billion, with most of that money going into Chrysler.

But within months, the industry spiraled into a downturn that has grown increasingly perilous for Detroit's automakers. With credit hard to obtain and U.S. consumer confidence at historic lows, some analysts estimate the selling pace slowed this month to its lowest level since 1983.

GM Chairman and CEO Rick Wagoner was in Washington on Friday and Monday warning policymakers of the dire state of the automaker's finances.

GM has lost $18.8 billion in the first six months of the year -- and nearly $70 billion since 2004.

On Wednesday, the biggest U.S. automaker found itself denying rumors that it was seeking help from Japan's Toyota Motor Corp.

Detroit's automakers are asking Washington to double the $25 billion in low-cost loans that were intended to help the auto industry produce more fuel-efficient cars.

They also are trying to position their auto loan financing operations to benefit from the $700 billion bank bailout.

Cerberus owns 51 percent of GMAC Financial Services, which it acquired from GM in 2006, and wants to obtain at least half of GM's 49 percent stake in the lending firm as part of a deal. That would allow GMAC to become a bank holding company eligible for a capital infusion under the bailout plan.

In addition to the difficulties lining up financing in the volatile environment, the deal faces another big hurdle, a GM official said -- winning the backing of the United Auto Workers union.

Without the UAW's support, congressional Democrats might not support a deal.

A source familiar with the situation said GM and other officials have spoken with the presidential candidates, Republican Sen. John McCain and Democrat Sen. Barack Obama, as part of their effort to line up support in the capital.

A spokesman for Cerberus, Peter Duda, said no meetings or conversations involving Cerberus officials took place.

MORE HERE
 

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Let me get this straight, Cerbus gets a near worthless company and wants out. GM management can't manage the monster they have now and wants to get bigger. And the best part is; the US government (ie tax payers) gets to pay for it. Brilliant.
 

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slow motion train wreck
Perhaps so. I don't know what else to think at this point.

I don't want either company to go under, I understand there are huge risks and possibilities of failure if they merge or don't merge.

I'd rather see them NOT merge and stay independent. I'd puruse a deal in which Chrysler ink an cooperative/industrial alliance with either GM, FoMoCo, Renault-Nissan, or Fiat than be taken over completely or absorbed by another automaker. But there many not be any time to do this and Cerberus is holding all the cards. They don't want an alliance - they want the company taken off their hands and any kind of alliance or minority shareholder stake won't alleviate them of the 80% of the company they'd have to retain.

This is probably the worst rough patch they've had to deal with in 30 years, so who knows what the eventual outcome will be.

However, if it means breaking up Chrysler to sell in pieces or the company becoming a takeover target for some foreign outfit or see even more job losses if either company fails -then perhaps this is the only way to do it.

It sucks no matter what, but I don't know what kind of alternatives there are in this environment where everyone is hurting, credit is tight, the economy is slowing and so much is uncertain.
 

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Cerubus is looking for a sucker to by a pig with lipstick, could such a fool be found? Nobody is going to buy Chrysler products even if GM buys them. Resale on new 2009 Dodge pickup after 24 months 1,000 dollars if your lucky. Look out for Chrysler sales next week, prepare to be shocked. The only investors who will make anything out of this are the owners of the hedge fund who stop bleeding money into the car pit. Why does GM want to play the fools part? Why doesn't GM learn the lesson of the Fiat money pit?Why did BMW sell Rover? GM makes good cars and trucks that sell well in this credit market, and GM would do well by having a new captive finance company so they could sell more cars.
 

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Cerubus is looking for a sucker to by a pig with lipstick, could such a fool be found? Nobody is going to buy Chrysler products even if GM buys them. Resale on new 2009 Dodge pickup after 24 months 1,000 dollars if your lucky. Look out for Chrysler sales next week, prepare to be shocked. The only investors who will make anything out of this are the owners of the hedge fund who stop bleeding money into the car pit. Why does GM want to play the fools part? Why doesn't GM learn the lesson of the Fiat money pit?Why did BMW sell Rover? GM makes good cars and trucks that sell well in this credit market, and GM would do well by having a new captive finance company so they could sell more cars.
so what are you saying?
 

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Let me get this straight, Cerbus gets a near worthless company and wants out. GM management can't manage the monster they have now and wants to get bigger. And the best part is; the US government (ie tax payers) gets to pay for it. Brilliant.
Careful, dederer, this kind of logic is going to have you labeled as "Unpatriotic" by some on this site. To be clear, supporting corporate welfare-the Feds lending taxpayer money to a risky business is nearly synonymous with welfare-and accepting every nuance of Detroit's business model, even if it doesn't make sense to most people, means you're patriotic.

"A merger of some type is likely to occur because the economics now are not sustainable for three separate Detroit automakers," Patrick Anderson, CEO of the consulting firm Anderson Economic Group, said Wednesday.
And the defeatists have the floor. Why is it that because the U.S. auto market's in trouble and sales have plummeted one of the Detroit 3 needs to fold? How 'bout Detroit gets competitive and causes foreign firms-Mitsubishi, Suzuki, Kia-to take the slack in the market, thereby causing them to fold? Wishful thinking, perhaps, but I'd like to see people-those from Detroit especially-start thinking a little differently about their situation.
 

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The only reason that this is going anywhere is that GM wants rid of GMAC, Cerberus wants rid of Chrysler, and neither has had any luck disposing of them.

GM is a car company, Cerberus is a financial one, and neither has been doing a very good job lately with their non0core business.

Patriotism doesn't enter into it.
 

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Why would GM want to get rid of GMAC? It, along with Chrysler Financial just qualified for the bailout.

There's an old saying in business dealings. If you look around the room and can't figure out who the sucker is, it's you.
 

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slow motion train wreck
Makes me think of the scene in one of the Autin Powers movies... Austin is on a steamroller rolling slowly towards a guard... the guard stands still screaming, watching the steamroller come closer and closer, without moving...
 

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I am saying GM should not be the fool and merge with Chrysler. Chrysler must sink or swim on there own. Cerubus is a wall street hedge fund that takes money from fools and sells them pigs with lipstick.
 

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The only reason that this is going anywhere is that GM wants rid of GMAC, Cerberus wants rid of Chrysler, and neither has had any luck disposing of them.

GM is a car company, Cerberus is a financial one, and neither has been doing a very good job lately with their non0core business.

Patriotism doesn't enter into it.
That true it is all-about GMAC. But are they really merger together, or is gm push the goverment for auto-loan and saying there mergering? Because if it does I see alot of chrysler brand's being sold off or being closed down, and not being merger with other gm brand's, if this merger thing goe's throw.
 

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I'm not saying that GM shouldn't be helped, I am saying that tax payer money needs to be used wisely. The current management of GM isn't saying how they will go forwarded other than "trust us". Share holders and employees have all "trusted" the current management. Lee Iacocca had a plan.
 

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it seems that neither has been doing well with their core businesses.

Maybe GM should get all of GMAC back. After all, Ricky is an ivy leaguester MBA so money is his expertise, right? And Cerberus should keep Chrysler and get GM's auto operations. Could they do worse that Rick?

The only reason that this is going anywhere is that GM wants rid of GMAC, Cerberus wants rid of Chrysler, and neither has had any luck disposing of them.

GM is a car company, Cerberus is a financial one, and neither has been doing a very good job lately with their non0core business.

Patriotism doesn't enter into it.
 

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People don't seem to get one thing. Look at it as a taxpayer investment. Let's say the Government gives the Big 3 the loans as requested. Either:

A) GM will collapse, and the Government will make money on the sale of GM/Chrysler assets and in turn will make a profit for taxpayers.

B) GM/Chrysler will thrive and pay back the debts, leading to a substantial profit for the Government-also known as Tax-payers.

The Government paid what amounts to pennies on the dollar for the worlds largest insurance company. Believe me, they will make money on this deal and that deal n the end.
 

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Why would GM want to get rid of GMAC? It, along with Chrysler Financial just qualified for the bailout.

There's an old saying in business dealings. If you look around the room and can't figure out who the sucker is, it's you.

hahahahaha!

Good one.

The sucker is the taxpayer. We aren't 'in the room' either.

I'm starting to believe this whole 'shotgun' wedding has something to do with getting out before the election. There's a whole desperation feel - particularly with what you hear from Cerberus. It has this same panicked tone we got from Bernanke ("RUUUUUUUUUUN!!") before they put the arm on us for a rescue of wealth - who says a fool and his money are soon parted? When you're making money by moving piles of money around, you've got Uncle Sam to catch you when you fall.

The big money pirates are taking as much gold as they can stuff in their sacks before facing a new President.

Obama keeps talking about how we'll be making these new efficient cars and making them in America - I wonder if this is tied to the 25Bill loan guarantees and floating the rumour of a unit body Suburban (to 'retool' for efficient vehicles).

Please Mr. Wagoner. I beg you to let this idea sit on the shelf for a few weeks.
 
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