Treasury says no aid for GM, Chrysler
Merger between two automakers appears to be off until after the election, as Treasury says it will not provide the Detroit companies with aid, the Detroit Free Press reported.
NEW YORK (CNNMoney.com) -- A merger between U.S. automakers General Motors Corp. and Chrysler is likely on hold until after next week's presidential election, as the U.S. Treasury Department said it will not provide the automakers with aid, the Detroit Free Press reported Friday.
GM had asked the Bush administration and Congress for a loan of about $10 billion to help keep the struggling company operational. It said that it could possibly use the aid to fund a merger between it and Chrysler, which is owned by Cerberus Capital Management.
Many experts have said both companies would need to merge to stop their recent bleeding. GM (GM, Fortune 500) has only about $21 billion in cash and Chrysler has $11 billion, although most of that was borrowed.
GM said Wednesday that overall sales were down 11.4% worldwide in the third quarter compared to the same period a year earlier. With auto sales plummeting globally, analysts say the merger would save the companies billions of dollars in redundant expenses.
But that would also mean tens of thousands of jobs lost. Analysts have estimated that the total job loss in a GM-Chrysler merger could be as high as 90,000.
Furthermore, the Treasury is currently strapped with nearly $3 trillion in Federal bailout and credit liquidity programs aimed at stemming the recent financial crisis gripping the U.S. economy.
After news broke that the government would not provide the companies with aid, the Michigan Economic Development Corp. canceled a meeting of local governments to discuss the possible merger, the Associated Press reported.