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GM, Chrysler Talking Merger

Ford spurned early overture from GM

October 13, 2008

General Motors began exploring a potential merger with Chrysler late last week, according to sources quoted by The New York Times. The Times also reports GM first sought out Ford as a potential partner, at least two months ago, before moving onto Chrysler.

Ford reportedly spurned GM in the talks. Of course, that was before the credit crunch arrived in mid September.

All the U.S. carmakers need help, with J.D. Power & Associates predicting last week that the global car market could collapse next year. Both GM and Chrysler are struggling financially, steadily losing market share in the North American marketplace.

It's hard to know which company would benefit most from a merger. Chrysler was purchased by German automaker Daimler, which quickly gave up and sold it to the current owner, Cerberus.

GM has reportedly teetered on the brink of bankruptcy, but last month unveiled its next generation hybrid prototype, the Chevy Volt. It also announced it would build a $350 million plant in Flint, Michigan, to build engines for the Volt and its four-cylinder Cruze, which is sold in international markets.

Last year, GM sales totaled 3.82 million vehicles, compared with 4.81 million five years earlier. Chrysler's sales have dropped to 2.07 million from 2.2 million. Both companies are losing market share to Toyota, which increased its U.S. sales to 2.62 million last year from 1.75 million in 2002.

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