DETROIT (AP) | A potential deal for General Motors Corp. to acquire Chrysler LLC is slowly moving forward, but the transaction is being hampered by an inability to borrow the money needed to make it happen, according to a person involved in the financing discussions. The person, who requested anonymity because the talks are private, said Monday that it could be a couple of weeks before a deal is completed, if it goes that far.
The person also said the federal government may have to contribute money in order to make the deal work, although he was not sure whether the government has been approached.
GM has been talking with Chrysler owner Cerberus Capital Management LP for at least a month about acquiring the struggling automaker, as Cerberus tries to exit the auto business and GM seeks Chrysler's cash stockpile of about $11 billion.
If the deal is consummated, GM likely would close factories, lay off thousands of workers and perhaps even close Chrysler's giant headquarters in Auburn Hills, Mich.
To do so, GM likely would need to borrow more money for severance packages and other restructuring costs. But that just isn't available right now for a company with a junk credit rating and liquidity concerns, said John Atkins, a fixed-income analyst at IDEAGlobal.com.
If it could sell bonds, GM would likely have to pay an excessive interest rate "north of 20 percent," Mr. Atkins said. "We're talking about a company that is well down the credit ladder."
Fitch Ratings reduced GM's credit rating one notch to "CCC" last month, and Standard & Poor's Rating Service has placed its "B-" rating of GM under review for possible downgrade.
Both ratings are noninvestment, or junk, grade.
Mr. Atkins said Cerberus and GM likely are running out of options as the U.S. auto market continues its slump and both Chrysler and GM continue to burn up cash.
Analysts have said GM has little to gain strategically from taking on Chrysler, but Mr. Atkins said it may give the company leverage with bankers who are reluctant to make loans and to get more concessions from the United Auto Workers union.
