GM may need government to help Chrysler deal

updated 6:49 p.m. ET Oct. 21, 2008

DETROIT - Like much of middle America, Mike McCarthy doesn't think taxpayers should have to pay $700 billion to bail out Wall Street. The second-shift worker at a Chrysler engine plant also doesn't think the government should pay to save his own company, although he's a lot less sure about that one.

McCarthy would like to see Chrysler's jobs and pensions preserved, but that directly conflicts with his opposition to a bailout. His dilemma is one that could soon be facing every member of the U.S. House and Senate.

Talks toward General Motors Corp.'s possible acquisition of Chrysler LLC may involve going to Congress for cash, according to a person involved in the financing discussions. The person, who asked not to be identified because the talks are private, said he was unsure if the government has been approached yet.

Cash-desperate GM is said to be interested in Chrysler first for its pile of money. Chrysler, whose sales have dropped 25 percent during the first nine months of the year, reportedly has about $11 billion available. It also has debt, but the amount isn't available because Chrysler a private company, 80.1 percent owned by the private equity firm Cerberus Capital Management LP.

But the cash may not be enough for GM to take on money-losing Chrysler, and that's where Congress may become part of the negotiations. Without additional money, GM may be unwilling to acquire Chrysler, which would add factories, brands, models, dealers and employees to GM, which already is too big for its sales.

Cerberus also is shopping Chrysler to the combined Nissan Motor Co. and Renault SA as it tries to exit the auto business.

Industry analysts say Congress may be interested in kicking in cash because if Chrysler goes into bankruptcy, the government could be forced to take on the pension costs for the Auburn Hills-based company's 124,924 retirees and spouses. Congress may also want to preserve as many of Chrysler's 49,000 U.S. jobs as possible.

While it may be a hard sell in Washington, Sen. Carl Levin, D-Mich., said in a debate Monday in Detroit that government may need to step in.

"If they need support to make some kind of a merger between Chrysler and another auto company happen, we clearly ought to do that," said the longtime advocate for the industry. "No other country in the world would stand by and watch major corporations go under this way without trying to do something about it."

Republican Rep. Thaddeus McCotter, who represents a suburban Detroit congressional district, said any government role in a deal was premature, but the United Auto Workers, a key constituency for majority Democrats, would be critical to any action by Congress. UAW President Ron Gettelfinger has expressed worries that a GM acquisition of Chrysler would lead to massive job losses.

"The reality is ... Gettelfinger and these guys are saying they don't think a merger is the best thing," McCotter said. "How do you do anything in a Democratic Congress, and it looks like it will stay a Democratic Congress, if the UAW is telling you that this is not good for jobs in America?"

With automakers unable to borrow in the frozen credit markets because of poor ratings, and unable to offer equity due to already depressed stock prices, analysts say it's almost inevitable that automakers would ask the government for help beyond the $25 billion in loans Congress approved last month for new fuel-efficient technology.

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