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Tony O'Kane | Oct 13, 2008

With the United States knee-deep in financial strife and its domestic auto industry still reeling from the impact of falling sales, a decreasing market share and the burden of rising healthcare costs for an aging worker population, it was inevitable that mumblings of a merger between some of America's biggest automakers would crop up.

Now, according to a report by the New York Times, General Motors and Chrysler (or more accurately Cerberus, the private equity firm that owns Chrysler) are getting ready to do the corporate tango and merge together in the interests of keeping both brands alive throughout these troubled times.

However, it's not a dead certainty that we'll be seeing the General join forces with the smallest of the "Big Three". Both GM and Chrysler aren't letting anything slip, but sources close to both companies say that the chances of such a deal being successfully brokered are about fifty-fifty. Word around town is that if neither can see eye-to-eye on a merger, then Cerberus may head across the pond to Renault/Nissan in the hopes of forging an alliance.

These certainly are interesting times for American manufacturers. GM's share price has been cut by over 87 percent in the past 12 months, and, if its fortunes don't improve, it's only got enough cash left in the kitty to run for no more than two years. Chrysler is no better. After being abandoned by Daimler last year and picked up by Cerberus, Chrysler is virtually bankrupt and is no longer obligated to report its financial activities.

If both Chysler and GM were to merge, it would produce an automaking conglomerate that would command around 35 percent of the US vehicle market and carry the potential to reduce operational costs for both companies through greater platform-sharing and streamlining of product lineups. The question of whether a merger will be enough to ensure the survival of both companies is one that won't be answered until much further down the line. One thing is for sure: while US automakers are down and hurting, there's still a little bit of fight left in 'em yet.

[New York Times]

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