So says the Journal:
With cash running low at both companies, Cerberus took the initiative to restart discussions that sputtered just weeks ago. At that time, both GM and Chrysler viewed a business combination as impractical and as a distraction from their mounting liquidity problems.
The renewal of the talks could be a way for Cerberus to show Washington — which is weighing a $14 billion rescue package for the auto industry — that it wants to cooperate in restructuring the industry, say people familiar with the buyout firm’s thinking.
Like many, we’ve wondered what, exactly, the combination would achieve. It sounds like it could be a total mess. Apparently it has a lot to do with Cerberus’ investments in GMAC and Chrysler Finance.
A person familiar with the GM-Chrysler talks said that Cerberus is eager to make concessions in order to arrange a combination of Chrysler’s finance arm with that of GM. “That is one of the core goals,” this person said. In order to achieve that end, according to this person, Cerberus feels it has to be flexible on the use of its ownership stake in Chrysler.
Chrysler’s financing arm warned auto dealers earlier this week it may have to temporarily stop making the loans they use to stock their lots with vehicles. Dealers, concerned Chrysler could seek bankruptcy-court protection, have been withdrawing as much as $60 million a day — about $1.5 billion so far — from the fund used to help them finance their inventory, according to a letter reviewed by The Wall Street Journal.
This is similar to the parts suppliers demanding upfront payments from GM, or buyers pre-emptively shifting away from domestic auto makers due to bankruptcy fears. In other words, technically they’re not bankrupt yet, but their partners and suppliers are acting is if they were — drawing down lines of credit, making more stringent demands, etc.