GM, Chrysler merger could have major impact on St. Louis region

A merger between General Motors and Chrysler could have a major impact on the already battered automotive sector of the St. Louis economy.

General Motors Corp. and Chrysler LLC have held preliminary talks about a merger or an acquisition of Chrysler by GM, according to published reports.

The Wall Street Journal ($), citing people it described as familiar with the discussions, reported that Cerberus Capital Management, the private equity firm that owns 80.1 percent of Chrysler and 51 percent of GMAC Financial Services, proposed trading Chrysler’s automotive operations to GM. The Journal said Cerberus would receive GM’s remaining 49 percent stake in GMAC.

The New York Times, also citing people familiar with the talks, reported that the automakers were discussing a merger. The Times did not mention GMAC, a traditional auto lender hit hard by the housing market downturn.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize.

GM and Chrysler both have assembly plants in Wentzville and Fenton, where more than 5,000 people are employed.

GM has a van assembly plant in Wentzville, where more than 2,300 people work. Because the vans assembled at the plant are mostly used as commercial service vans, GM’s Wentzville operations have been mostly insulated from the year’s dramatic drop in overall automotive sales.

The same can’t be said in Fenton.

Chrysler has two assembly plants in Fenton where the Dodge Ram pickup and Dodge Grand Caravan and Chrysler Town & Country minivans are produced. The future of both plants have been under question as sales of full-size pickups and minivans dropped as gas prices skyrocketed over the past two years.

About 1,100 people work on the Dodge Ram assembly line. However, Chrysler in September cut a second shift at the plant despite the launch of a new model of the pickup for the 2009 sales year.

Chrysler also plans at the end of this month to idle its minivan assembly operation in Fenton. The shift reduction at the pickup plant and the shutdown of the minivan plan will put 2,400 people out of work.

The negotiations between 100-year-old GM and 83-year-old Chrysler began more than a month ago, according to the Times. Its sources said the chances of a merger were “50-50″ as of Friday and likely would take weeks to complete.

“Without referencing this specific rumor, as we’ve often said, GM officials routinely discuss issues of mutual interest with other automakers,” GM spokesman Tony Cervone said.

“The company is looking at a number of potential global partnerships as it explores growth opportunities around the world,” Chrysler spokeswoman Lori McTavish said. “Beyond those partnerships already announced however, Chrysler has not formed any new agreements and has no further announcements to make at this time.”

For the latest developments on this story, click here.

The Associated Press contributed.