Any merger between Chrysler and General Motors is now on hold until after the US presidential election next Tuesday.
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Sources have told the Reuters news agency the outgoing Bush administration has ruled out funding for any such merger.
One source said that this could allow Chrysler owner Cerberus Capital Management to restart talks with the Nissan-Renault alliance but alliance chief Carlos Ghosn said earlier this week any deal among automakers involving a cash element was unlikely unless the cash came from outside sources such as from the government.
Chrysler was reported to have said it was moving ahead with a cost-cutting plan as it pushes ahead with plans for new vehicles, including a plug-in hybrid.
“We are taking the tough but necessary decisions to stabilise the business in the short-term and making the viable long-term business decisions to restructure the company for the future,” spokeswoman Lori McTavish told Reuters.
A Bush administration official has told the news agency the Treasury Department was not negotiating on direct aid for the merger but was working instead to hurry along the distribution of US$25bn in low-cost loans for automakers to retool factories, as authorised by the House of Congress last month.
