“Follow The Money”

“Why Does GM want to merge with Chrysler?”

The real prize for GM might, however, be something much more tangible. In August Cerberus claimed that Chrysler still had $11 billion in cash from loans raised earlier. There is speculation that it might be willing to throw that in, and add some more, in exchange for a stake in the merged entity. GM, which is currently burning through more than $1 billion a month, had access to $21 billion in cash and $5 billion in credit at the end of June. Brian Johnson, an analyst at Barclays Capital, thinks that the carmaker needs a further $10.3 billion to get it through to the end of next year, when cost savings and recovering demand should start to kick in. As one of GM’s rivals observed this week: “We think it’s cash that’s driving this pony.”

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