Bush set to Approve Loan Today as GM and Chrysler Reopen Merger Talks

December 19, 2008

Detroit (ChattahBox) — The White House will apparently come to the rescue of General Motors and Chrysler by providing them with low-interest loans to be announced this morning.

The Whitehouse plans to step in to help the ailing auto industry. Under the plan, the auto giants will be able to stay afloat into the new year reportedly until March. The government could take back the money should the automakers not comply with federal restrictions as a condition of receiving the funds.

The White House has been talking to the Obama team on its strategy, and the incoming Democratic administration has expressed no objections to the plan.

Meanwhile General Motors Corp. and Chrysler LLC have reopened merger talks, as Chrysler owner Cerberus Capital Management LP has signaled its willingness to give away part of its ownership in the auto maker, say people familiar with the discussions.

With cash running low at both companies, the Wall Street Journal said Cerberus took the initiative to restart discussions that sputtered just weeks ago. At that time, both GM and Chrysler viewed a business combination as impractical.

The renewal of talks could be a way for Cerberus to show Washington that it wants to cooperate in restructuring the industry, WSJ said quoting knowledgeable people.

And it could offer the firm a way to protect its stakes in two distressed auto-finance companies, GMAC LLC and Chrysler Financial, which are crucial to the survival of the Detroit auto makers, it added.

But the paper said it is not clear what effect the renewed merger talks might have on the intricate political calculus hanging over a government rescue of the auto makers.

Chrysler said on Wednesday,it would suspend production at all 30 of its plants for a month starting Friday.


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