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General Motors has refused to confirm or deny speculation that it plans to merge with Chrysler, but sources inside both companies say talks are well underway.
Industry analysts have reacted unenthusiastically to a potential merger between GM and Chrysler. A GM-Chrysler alliance would widen the gap with Ford, but many believe that any savings from administration efficiencies and shared model platforms would be years away. Apart from any other complications, it would create a 10,000-strong dealership network at a time when sales have slumped around 20 per cent.
"As we have often said, GM officials routinely discuss issues of mutual interest with other automakers," said Tony Cervone, GM's vice president of communications, adding "As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere."
However, media in the US reported over the weekend that Cerberus Capital Management, which owns 80 per cent of Chrysler, had proposed swapping its share for GMAC, GM's financial services division.
GM has lost around $70bn since it last made a profit in 2004. While sharing new car platforms and development costs with a maker such as Chrysler could make financial sense, there is a danger that the company could take on too many extra costs at a time when it is still burning through around $3bn a quarter.
Daimler paid $36bn for Chrysler in 1998, but kept just a fifth of the company when it sold the remainder to Cerberus last year for around $7.5bn, roughly a quarter of what it paid for it.
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