Options scarce if GM-Chrysler merger talks fail

[rickaren]

Wed Oct 22, 2008

"Even if Chrysler goes away, the cars it has sold over the last decade or so are still on the road and still need spare parts," Mercer said. "While sales would slowly dwindle down, spare parts margins are high. Arguably, the only thing making profits at Chrysler right now might be spare parts."

But as GM struggles to line up financing for an acquisition, attention has turned to an even more uncertain prospect: What happens if the controversial deal falls apart?

For Chrysler, owned for the past year by Cerberus Capital Management, the options are dwindling, according to bankers, consultants and experts on corporate strategy.

If GM pulls out, people briefed on the talks expect Cerberus to seek another buyer for the maker of Jeep, Dodge and Chrysler models. Failing that, Cerberus would likely look to break up Chrysler and sell whatever assets it could, they said.

"Selling off assets will only become strategy if GM is off the table and they have not found any other buyer," said one person familiar with the matter, who estimated the GM deal now has about a 1-in-3 chance of success because of difficulties in securing outside funding.

Another person familiar with Chrysler's planning said the automaker had drawn up scenarios that would involve selling key assets like the Jeep brand, its specialty parts business Mopar and even its engineering operations if Cerberus is pushed to break up the 80-year-old automaker

Much more here,FROM BAD TO WORSE
LINK: Options scarce if GM-Chrysler merger talks fail | Special Coverage | Reuters