A potential deal involving General Motors (GM), Chrysler and private-equity firm Cerberus could be in the works, according to Flint, Mich., Mayor Donald Williamson.
During an interview with FOX Business Network, Williamson said a deal could involve GM giving an additional 41.8% stake in GMAC -- its financial unit -- to Cerberus, which would make the private equity company’s total investment in GMAC 91.8%. In return, GM wouldreceive Chrysler’s automotive business.
“I think they have the deal made,” said Williamson, citing conversations he has had with people involved in the discussions. “You will see that General Motors will own Chrysler.”
The government Friday gave the auto makers a short-term low-interest loan in a bid to shore up their capital position, but many analysts say major changes need to be made to keep the companies viable.
The two ailing auto makers -- which have been quickly going through capital -- would be able to cut costs as a combined company. According to Williamson, if the auto makers were forced to close their doors, it “would have been a complete disaster for America.”
On Friday afternoon, Cerberus said it will invest the first $2 billion of Chrysler Financial profits back into Chrysler's auto operations. The company believes the funding will support the $4 billion loan Chrysler is due to receive from the government as part of its rescue of the auto industry.
Still, the move comes with some strings attached. Cerberus said Chrysler must restructure its debt and reduce its labor costs to the level of its overseas rivals. Without those actions, Cerberus fears the auto maker will not be able to repay its government loan or achieve a solid level of viability.
Cerberus said it will facilitate by offering equity stakes in Chrysler to its unions and creditors.
The Associated Press contributed to this report.
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