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US Auto Rivals Ford and GM Considered Possible Merger

Mil Arcega
Washington, D.C.
September 20, 2006

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A leading trade publication says General Motors and the Ford Motor Company explored the idea of a potential alliance in July. Although Automotive News reports discussions between the rival automakers ended almost as quickly as they began, some analysts say such a partnership has some appeal for the struggling automakers.

It's a discussion that would have been unthinkable just a few years ago: General Motors, the largest automaker in the world considering a partnership with its biggest rival, Ford. But Automotive News editor Ed Latham says that's exactly what senior executives at Ford and GM had in mind when they met this summer.

"This is a big deal,” says Mr. Latham. “It's very, very significant that they might even consider talking to one another about an alliance, because going back to the early days of the last century, the days of Louis Chevrolet and Henry Ford, General Motors and Ford have been the natural competitors in this market."

Automotive News, which reported the story on Monday, says Ford and General Motors engaged in preliminary talks in July after GM confirmed it was exploring a possible alliance with foreign automakers Renault and Nissan. Spokesmen for Ford and GM have declined to comment.

But with market shares for both companies down about 10 percent this year, Latham says it's not surprising Ford and GM would consider joining forces. "This was apparently in response to the idea that this is a period of consolidation, a period when alliances and acquisitions and hook ups are going to happen."

Last week Ford offered buyouts to 75,000 union workers and said it was cutting 14,000 salaried positions. GM, which lost more than $10 billion last year, has reduced its workforce by one-third and plans to shut down 12 plants.

"The upside would be that you would have one, big stronger enterprise that could share platforms and find ways to cut costs. The downside is, once that happens, they have way too many brands," says Latham.

Ford and GM collectively employ about 270,000 workers. Analysts say a merger would have resulted in massive job cuts.

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