Chrysler's top executive confirmed Monday that the company is holding talks about a potential alliance with another automaker, but cautioned no deal had been reached.
“I can tell you that we have approached and have been approached by third parties who are interested in exploring future possibilities with Chrysler,” Robert Nardelli said in an e-mail to employees, responding to reports that Chrysler and General Motors were in merger talks.
“As the company evaluates strategic options to maximize core operations and leverage its assets, we engage in a dialogue with these parties,” Nardelli wrote in the e-mail obtained by AFP.
Nardelli, who has in the past dismissed rumors that private equity group Cerberus Capital Management was considering a sale of the Michigan-based automaker, did not specifically deny that the talks could eventually result in a merger.
Instead, he told employees he would not “confirm or disclose the nature of our business meetings, as many times they do not lead anywhere.”
“It's important for you to know that beyond those partnerships already announced, Chrysler has not formed any new agreements and has no announcements to make at this time,” Nardelli added.
Officials from General Motors said privately the company was taking a very cautious approach to any potential deal.
“It's weeks, if not months away, if anything happens at all,” a senior GM executive, who asked not to be identified, told AFP.
Renault-Nissan is though to be the other company interested in Chrysler.
Union representatives have begun to express reservations about a merger.
“I don't see what we get out of it,” said one United Auto Workers official representing Chrysler workers, who also asked for anonymity.
A merger with GM in particular would not help the two companies overcome declining sales, the official added. “We're both way too dependent on trucks and sport utility vehicles.”
Underscoring union concerns, GM announced plans Monday to shut a truck assembly plant Janesville, Wisconsin two years ahead of schedule.
GM said earlier this month it planned to shut an SUV plant in Moraine, Ohio before Christmas.
Analysts were also skeptical about the benefits of a merger.
“I know Cerberus is trying to find a partner for Chrysler. But I'm not sure GM is the right partner,” said Dan Oxyer, a partner with A.T. Kearney in Southfield.
Chrysler also has relatively few products that are not duplicates of those already sold by GM said analyst Laurie Harbour-Felax, who runs the Harbor-Felax Group.
“I can see the value in terms of reducing overlap and reducing capacity,” she told AFP.
“But the cost of doing that are so enormous, you have to wonder if it's really worth it.”
While GM may get a cash boost from a merger with Chrysler, a tie-up with Ford Motor Co might offer better longer term strategic rewards, said Himanshu Patel, JP Morgan's automotive analyst.
“Aside from the obvious buckets of procurement/engineering savings, Ford offers GM cost synergies on a global scale and a partner that offers sizable pricing synergies in select segments if not most at least in North America and Europe,” Patel wrote in a research note.
