Chrysler hopes to revive merger talks with General Motors after bailout is agreed

CHRYSLER HOPES to revive merger talks with General Motors once a government bailout package for Detroit's car-makers is agreed, allowing the two companies to address their immediate liquidity problems.

Talks between the two companies were "still going on at a very low level" and would be restarted "immediately" once terms of a bailout were approved, a person familiar with recent discussions told the Financial Times yesterday.

"The talks were suspended while this process played out to see where everyone was," the person, who requested anonymity, said.

The two companies held talks on a possible tie-up that would allow both to cut costs and boost efficiency.

However, GM said last month that it had set aside talks on a possible strategic acquisition to "focus on its immediate liquidity challenges".

Tony Cervone, GM spokesman, said yesterday: "We continue to focus all our efforts on our short-term liquidity."

America's three loss-making car-makers are asking the US Congress for emergency bridge financing to head off a cash crunch.

Bob Nardelli, Chrysler's chief executive, told the Senate this week that Chrysler was running through about $1 billion of cash a month and that its reserves were now down to $6.1 billion. He said the car-maker would be "dangerously close" to running out of money by the end of the year.

Shares in GM and Ford slid into double digits - further towards penny-stock status - yesterday after ranking US lawmakers cast further doubt on the prospects of financial aid from the current administration.

Chrysler, privately owned by buyout group Cerberus, is not publicly traded.

With doubts rising that a bailout will be approved by the current Congress, the car-makers may have to wait for help from the incoming administration of president-elect Barack Obama. - ( Financial TimesService)