GM, Cerberus want US cash to fund merger

Since General Motors is havng difficulty raising the cash needed for acquisition of Chrysler from Cerberus, Stephen Feinberg, Cerberus’ founder and CEO, is said to have suggested the companies approach the federal government for an investment in the merged automakers.

The deal, which is widely seen by analysts as a potential disaster for both companies, is being pushed by Cerberus, which is reportedly eager to get rid of Chrysler’s automotive operations and get the other 49 percent of GMAC from General Motors. Feinberg believes the ailing finance company will be the beneficiary of the massive federal bailout of the mortgage and financial industry. Cerberus would also retain Chrysler Financial.

General Motors’ CEO Rick Wagoner and members of the GM board are said to be skeptical of the deal which is being internally promoted by Fritz Henderson, GM’s president and COO. For its part, GM wants the reported $11.7 billion in Chrysler’s cash reserves and would like to be rid of GMAC, which has become a drain on its dwindling resources. On the downside, GM, which is already burning through cash at a rate that could leave it without enough money to cover its operating expenses by sometime next year, would have to assume numerous legacy liabilities, including Chrysler’s healthcare and pension obligations and warranty support for Chrysler’s lifetime powertrain warranty. In addition, the merger is likely to be strongly opposed by the UAW which views the deal as a way to obtain further concessions than those granted in the 2007 labor agreements.

Advocates of the merger estimate potential savings of $10 billion but experts believe the costs associated with the merger may overwhelm the combined company before any savings can be realized.