Companies won't confirm published reports, as struggling automakers cope with economic downturn.

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

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

The New York Times, also citing people familiar with the talks, said 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 because both GM and Cerberus want to quickly divest the assets under discussion.

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.

Both newspapers posted their stories on their Web sites late Friday.

"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."

GM (GM, Fortune 500) shares closed Friday at $4.89, up 13 cents, or 2.7%. On Thursday, they closed at $4.76, the lowest level since 1950.

GM said Friday, in response to the stock price, that it is nor considering a bankruptcy filing.

"Clearly we face unprecedented challenges related to uncertainties in the financial markets globally and weakening economic fundamentals in many key markets, but bankruptcy protection is not an option GM is considering," a company statement said.

First Published: October 11, 2008: 6:13 AM ET

Source: CNN Money http://money.cnn.com/2008/10/11/news/companies/bc.apfn.gm.chrysler.merger.ap/index.htm?cnn=yes

Wow, that would be an interesting turn of events. Wonder if it would actually make them any stronger?

or just allow them to cut jobs when they consolidate.

I would say that the Dodge trucks will bite the dust. The only one that GM would keep is the Sprint commercial truck. A big question is how many of the car lines would be gutted. I really cannot see much reason for GM to buy Chrysler other than strip it down for parts. I can see them keeping Jeep, but the Mopar lineup is not all that viable in the econocar lineup.

I can see GM using some of Mopar's recent suspension advances.

CBS News

The WSJ had an article about it a few days ago. The main appeal for GM is that Chrysler apparently has cash which GM desperately needs in the short run. I can't see it working. Car company mergers almost never go well. GM needs to shrink not grow at this point.

etyppo,

Check your PM.

Thanks!