Renault-Nissan alliance chief Carlos Ghosn could achieve his long-held goal of acquiring a North American partner by taking a stake in Chrysler, a US newspaper reported on Wednesday.
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There have also been reports GM could seek an investor stake as an alternative to a deal with Chrysler.
“Sources familiar with the situation” told the Detroit News that the Renault-Nissan alliance wants to to acquire around 20% of Chrysler.
Chrysler and Nissan recently agreed model-sharing deals under which the Japanese automaker would supply the US firm with mid-size cars while Chrysler’s truck expertise would be used to supply the next generation replacement for Nissan’s current US-built Titan line.
The paper said Chrysler private equity owner Cerberus Capital Management is considering the Alliance offer as it continues talks with General Motors about its Chrysler holding.
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By GlobalDataSources told the Detroit News Nissan would acquire the stake because it has cash on hand while Renault now has debts of over US$5bn.
However, a different source told the paper Cerberus founder and CEO Stephen Feinberg prefers a deal with GM, viewing it as the best solution for the troubled US auto industry.
Earlier reports this week said the two had considered various scenarios including GM taking over and absorbing Chrysler – resulting in plant closures and job losses estimated in the tens of thousands – or establishing it as a separate subsidiary with Cerberus taking a stake.
However, analysts have said such a move would require a large amount of additional financing which GM, estimated to be burning through $1bn a month in cash, would have trouble obtaining.
“The key to any deal is the availability of financing to fund present cash burn rates and substantial merger costs,” Citi auto analyst Itay Michaeli told the Detroit News.
He reckons the combined automaker would need at least $10-$12bn of fresh cash. “Attaining such financing could require Cerberus’ participation and perhaps that of certain Chrysler bank debt holders,” he said in a research note cited by the paper.
The Detroit News said a deal with the Renault-Nissan alliance would leave Chrysler largely intact and it would take part in joint purchasing, vehicle platform development and other programmes, slashing its costs, while retaining its own management and brands.
The paper noted that Ghosn has long expressed a wish to add a North American partner to the alliance.
However, sources told the Detroit News it was far from certain that Cerberus would conclude a deal with either Renault-Nissan or GM.
Sources also told the paper that GM and Cerberus want a deal agreed before the presidential election on 4 November when politicians may be more receptive to requests for federal aid to complete a merger.
Meanwhile, Democratic presidential candidate Barack Obama – currently polling as front runner ahead of Republican rival John McCain – has not taken a position on the possible merger of GM and Chrysler, a senior economic adviser told Reuters on Tuesday, declining to say whether he backed a deal that could lead to heavy job losses.
A McCain economic adviser told the news agency any merger should be evaluated on the basis of its competitive implications.
Sources told Reuters cash-strapped GM would need between $4-5bn for payouts for the estimated 30,000 to 40,000 jobs that would be cut through a merger and to close most of Chrysler’s 14 assembly plants and those job losses would hit voters in the important electoral states of Michigan and Ohio.
McCain’s adviser told the news agency the candidate also supported the loan guarantees already proposed for the auto industry but thought they should be pushed forward faster than currently planned.
Separately, the Financial Times said General Motors was looking for a large investment from outside investors as a possible alternative to a deal with Chrysler.
Such a capital injection would be similar to recent investments by billionaire investor Warren Buffett in General Electric and Goldman Sachs, the paper said.
But the paper cited an unnamed banker as questioning the chances of GM finding an investor to do so.
Ford investor Kirk Kekorain on Tuesday said his investment arm Tracinda had reduced its stake in Ford. US reports on Wednesday suggested the billionaire investor had become concerned after two external members of Ford’s board resigned.
