DETROIT --- In the doomsday scenario raising anxiety around the Motor City, General Motors Corp. makes a deal for Chrysler LLC, and thousands of Chrysler's 66,409 employees lose their jobs as cash-desperate GM swiftly cuts redundant operations and sheds unprofitable models. Factories and dealerships close, and the lights go out at Chrysler's corporate headquarters.
Though it might be unimaginable, industry analysts say GM would have no choice but to slash costs if it acquires struggling Chrysler from its owner, New York private equity firm Cerberus Capital Management LP.
Both sides have been talking for months, but the pace recently has increased. Cerberus wants out of the auto business, and as the credit markets have dried up, GM, worried about running too low on cash before the U.S. auto market rebounds, wants Chrysler's currency stockpile.
A person familiar with the negotiations said Friday that the talks have advanced to the point where top executives of both companies have looked at a deal and asked for refinements. The person spoke on condition of anonymity because the talks are secret.
In August, Chrysler reported $11.7 billion in cash and marketable securities as of June 30. That figure remains around $11 billion, the person said, despite Chrysler's U.S. sales being down 25 percent through September, the largest decline of any major automaker.
Detroit-based GM is burning up more than $1 billion per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year. GM's sales are down 18 percent, and the company has lost $57.5 billion in the past 18 months. Chrysler's money pile would help solve GM's cash problem.
But GM and Cerberus are still a long way from a deal, according to the person, and GM's board reportedly is cool to the idea.
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