Noting that the talks between GM and Cerberus Capital Management, the private equity arm that owns Chrysler, began over a month ago, the New York Times said, 'negotiations are not certain to produce a deal.'
Quoting two people close to the process, the newspaper said that chances of a merger were "50-50" as of Friday and "would most likely still take weeks to work out."
"The meetings between General Motors and Cerberus began more than a month ago, said people familiar with the discussions, and the companies have held several talks involving their most senior executives.
"Given that both GM and Chrysler are struggling, the two sides may determine a merger may not be in their best interests," the New York Times reported on Saturday.
The report, quoting the two people, said that the exploratory talks have included debates over various calculations of the savings that would result from a merger but neither side has yet to dig into each others private financial books and records.
Attributing to people familiar with the discussions, the newspaper reported that Cerberus is continuing to hold talks with other automakers, including Nissan and Renault, and added that it is not clear at what stage those discussions have reached.
"If GM, the nations largest automaker, combined operations with Chrysler, the smallest of Detroit's Big Three, they would create an auto giant that would surpass Japan's Toyota Motor Company, which recently has been battling
GM for bragging rights as the worlds largest automaker," the report said.
In recent times, the auto industry has been squeezed by high gasoline prices and deepening credit crunch. Further, America's auto icons -- GM and Chrysler -- have been struggling in their business, especially with product line-ups.
Moreover, rumours are rife that GM could seek bankruptcy protection as the auto giant's cash reserves are coming down and also the firm's stock has taken to a severe beating in the market.
According to New York Times, how government and labour might react to a potential merger of GM and Chrysler is unclear. Anti-trust questions could be raised, but political issues could be overshadowed by the precarious financial prospects of both automakers, it added.
Quoting people briefed on the deal, the report said that the talks started as an exploration of possible joint venture opportunities between GM and Chrysler.
In August last year, Cerberus had acquired over 80 per cent stake in Chrysler from the German automaker Daimler AG.
"Under the terms of the deal being discussed, Cerberus would end up owning an unspecified equity stake in GM-Chrysler," the New York Times said quoting people briefed on the talks.
"But the marriage of GM and Chrysler has far more potential than hitching Chrysler to a foreign automaker. While GM and Chrysler may be hamstrung by labour contracts from cutting jobs, the two companies could combine dealers, product lines and advanced vehicle technology," the report said.
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