Merger reports drive up GM shares

MARKET CHATTER

SHARES in General Motors surged yesterday after reports that the top US car maker had been in merger talks in recent weeks with smaller rivals Ford and Chrysler.

Ford is believed to look the strongest of the three and has options for raising more cash to buy time to complete its turnaround plans.

Analysts were sceptical that GM could achieve substantial savings from a merger. But a deal with Chrysler might allow the company to boost its cash holdings, reassure consumers that it was not going out of business and give it bargaining power to seek new concessions from the United Auto Workers union, they said.

GM and Cerberus Capital Management have had talks about a deal that would combine it with Chrysler, sources said at the weekend.