Merger or alliance for GM-Ford?

By MSN Money staff with wires

Merger buzz is shaking Detroit today after an industry newspaper reported that automakers General Motors (GM, news, msgs) and Ford (F, news, msgs) were discussing a merger or alliance.

Trade journal Automotive News quoted what it said were several people familiar with the talks as saying that discussions involving senior executives began in July and are not taking place now.

The journal quoted one source as saying that GM Chief Financial Officer Fritz Henderson and his Ford counterpart, Don Leclair, discussed a GM-Ford alliance in August.

GM and Ford declined to confirm any talks.

"As we've often said, GM officials routinely discuss issues of mutual interest with other automakers," GM spokesman Brian Akre said early Monday morning. "As a policy, we do not confirm or comment publicly on those private discussions, which in many cases never lead anywhere."

Ford's Oscar Suris, also speaking before business hours, said: "We're not commenting on speculation."

Struggling automakers slashing costs

The report comes as GM and Ford have been slashing their work forces and closing plants in efforts to reverse multi-billion-dollar losses. With gasoline prices high, the U.S. automakers' sales have been hurt by competition from more fuel-efficient models from Asian rivals.

Because GM and Ford are the two biggest U.S. automakers, any deal between them would presumably face scrutiny by U.S. antitrust regulators.

On Friday, Ford said it would slash $5 billion in costs and one-third of its work force. The company warned its auto business would not make a profit in North America for another three years. It also suspended its dividend and pledged to revamp a vehicle line-up called by analysts.

However, the No. 2 U.S. automaker ruled out an immediate sale of its Jaguar brand, disappointing investors who wanted Ford to press ahead with asset sales to raise cash.

Ford's discussion of restructuring plans sent shares to their biggest single-day percentage decline in almost four years.

Earlier this month, Ford named Alan Mulally, a former Boeing (BA, news, msgs) executive, as chief executive, ending the troubled five-year stint of Bill Ford Jr. as the company's operational head.

GM is in the midst of its own restructuring as it tries to recover from a $10.6 billion loss in 2005.

Turnaround efforts at the world's largest automaker have gained traction this year as 34,400 workers -- about a third of its work force -- have accepted early retirement and buyout offers. GM is also closing 12 plants.

Still, CEO Rick Wagoner is under pressure to show further improvement.

Multiple merger talks?

In July, GM, Renault of France and Nissan Motor (NSANY, news, msgs) of Japan announced a 90-day review of an alliance among them.

Talk of alliances involving GM came after GM shareholder Kirk Kerkorian, who owns a 9.9 percent stake in the company, called for GM, Renault and Nissan to pursue an alliance.

Carlos Ghosn, the chief executive of Renault and Nissan, has said the benefits from an alliance would be similar to the gains from the Renault-Nissan alliance, which have included cost savings from joint purchases of auto parts.

Last year, GM and Ford agreed to jointly develop a new six-speed transmission, which is in production in plants at both companies.