GM reportedly asks Treasury for merger help
General Motors Corp., the largest U.S. automaker, has asked the Treasury Department for financial aid to help complete a merger with Cerberus Capital Management, two people with knowledge of the matter said.
Federal aid may boost cash for the money-losing auto- makers while they await merger savings that analysts have said may take months to realize.
The U.S. auto market may shrink this year to the smallest since 1993 as the credit crunch and a slowing economy crimp demand.
Tony Fratto, a White House spokesman, declined to comment on any federal involvement in merger talks. A message left for comment for Keith Hennessey, chief of the White House National Economic Council, wasn’t immediately returned.
Pierce Scranton, chief of staff to Ed Lazear, chairman of the Council of Economic Advisors, wouldn’t comment.
GM and Chrysler, the third-largest U.S. automaker, aren’t commenting on their talks, and neither is Cerberus, the New York-based buyout firm managed by investor Stephen Feinberg.
The automakers have estimated that a combination would need $10 billion in new equity to shut plants, cut jobs, integrate operations and add liquidity, the Wall Street Journal reported citing people involved in the talks or briefed on them.
Treasury Secretary Henry M. Paulson would prefer any assistance to come from the $25 billion low-interest loan plan for the auto industry to build fuel-efficient vehicles, not the $700 billion bailout of the banking system, said the people knowledgeable about the plan.
They asked not to be identified because the talks are private.
The $25-billion automaker-loan program was approved by Congress on Sept. 27.
The funds, which are supposed to help convert factories to make more-efficient vehicles, might not be available for six to 18 months, and there may be restrictions on how the money could be used.
Auto lenders such as GMAC, GM’s finance arm, and Chrysler Financial might be able to tap the $700 billion Troubled Asset Relief Program.
Cerberus owns 51% of GMAC and all of Chrysler Financial, which lend to auto buyers as well as to auto dealers to help buy inventory.
