Breaking News : Renault-Nissan Alliance Seeking 20% Chrysler stake

DETROIT : October 22, 2008 - The Detroit News reports that the Renault-Nissan alliance is proposing to acquire around 20% of Chrysler LLC and bring the Auburn Hills automaker into the French-Japanese automotive partnership. The offer is now before private equity firm Cerberus Capital Management LP, which also is in talks with General Motors Corp. about its Chrysler holding.


Sources familiar with the discussions...said Tokyo-based Nissan would acquire the stake because it has cash on hand, whereas Renault now has debts of more than $5 billion. Nissan and Chrysler already have several joint projects in the works, with Nissan planning to produce small cars for Chrysler and Chrysler scheduled to make the next generation Titan full-size pickup for Nissan. Chrysler and Nissan managers say the teams work well together.

But another source close to the talks has told The Detroit News that Cerberus founder and CEO Stephen Feinberg favors a deal with GM, viewing it as the best solution for the embattled U.S. auto industry. Under the scenarios being discussed with GM, the automaker might absorb its smaller rival or establish it as a subsidiary, with Cerberus expected to take a stake in the combined automotive entity. But these scenarios would require financing, which is hard to obtain in this economic environment.

Citi auto analyst Itay Michaeli estimated that the combined entity would need at least $10 billion to $12 billion of fresh cash.

[Source : Detroit News]