A deal to merge General Motors and Chrysler has hit an impasse after the Bush administration ruled out funding for it, according to media reports.
The New York Timeswebsite reported today that the Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the merger.
Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department, the report said.
A merged GM-Chrysler would be the largest automaker by sales, but analysts have cautioned it would struggle to turn around the overlapping Detroit-based operations of two firms that have seen mounting losses tied to a global downturn.
Chrysler, which has seen its sales fall 25 per cent this year, said it was moving ahead with a cost-cutting plan and with plans for new vehicles, including a plug-in hybrid.
"We are taking the tough but necessary decisions to stabilize the business in the short-term and making the viable long-term business decisions to restructure the company for the future," Chrysler spokeswoman Lori McTavish said.
GM had approached the US Treasury about support for the merger through some $10 billion in new funding that would have included taking an ownership stake in the merged company, people familiar with the talks have said.
With merger aid off the table, talks about combining GM and Chrysler are on hold until after the November 4th election when the parties hope to sit down with representatives of the new administration, the sources said.
A decision by the Bush administration to provide the government's first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 had been widely seen as the merger's best chance for success.
Private investors consulted in the course of the talks have not expressed interest in providing funding for the controversial deal in the absence of government backing, people with knowledge of the talks have said.
Agencies