GM-Chrysler talk faces big test when markets open today

[DainBramaged]

Source: Detroit Free Press

The opening of trading this morning on the New York Stock Exchange will give investors a chance to put their money on what they think of the possibility of General Motors Corp. merging with rival Chrysler LLC.

Revelations that GM officials were talking with Chrysler's majority owner Cerberus Capital Management -- and reports that the odds of a deal happening are as high as 50% -- came to light late Friday. So Monday's trading will be the first opportunity for investors -- coming off of one of their worst weeks ever -- to pass judgment.

Several industry analysts were skeptical that Wall Street would greet the news positively. "I don't know if the market is going to receive this well," said Erich Merkle, an analyst from Crowe Horwath LLP. "You've got GM, who most people think is on the verge of bankruptcy in the not-so-distant future, given their cash position. And then taking on Chrysler at this point -- I just don't know if the market is going to look at that favorably, unless there is something more under the surface."

"There has to be more to the deal than meets the eye," said Kevin Tynan, an analyst at Argus Research. "Seeing how the Cerberus-Daimler deal went at a time when the market was more stable, and they paid to get rid of it, I can only imagine the deal Cerberus is offering.



Read more: http://www.freep.com/article/20081013/BUSINESS01/810130337

[FarCenter]

1. Probably won't happen

What's been written about is that Cerberus would swap Chrysler for the half of GMAC that it doesn't already own.

It would seem to make sense, since GM would be out of the financial business, which is not it's area of expertise, and Cerberus would be out of the car business, ditto.

However, I doub that it will happen. The big stumbling block would be the retail auto dealers. About half of the GM and Chrysler dealers need to be eliminated, but they'll never agree to meaningful consolidation. And they have huge political influence at the State and Local levels of politics.

[DainBramaged]

2. Wellllllllllllllllllllllllllll what happen to the market today???

http://moneycentral.msn.com/investor/research/msnbc/newsnap.asp?symbol=gm

up 33%