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GM-Chrysler Merger Likely to Face Antitrust Obstacles

From bloomberg| March 29 , 2007

 General Motors Corp. probably would have to sell at least part of the light truck division of DaimlerChrysler AG's Chrysler unit to clear U.S. antitrust review in any potential takeover, two analysts said.

``A GM-Chrysler merger would require GM to divest most, if not all, of Chrysler's truck assets,'' Bear Stearns & Co.'s Peter Nesvold in New York said today in a research note. ``This is highly unattractive, based on the disproportionate amount of profit that the truck assets contribute.''

DaimlerChrysler is weighing the future of money-losing Chrysler after saying on Feb. 14 ``all options'' were under consideration. GM, the world's largest automaker, is discussing joint vehicle development with Chrysler and an outright purchase, people with knowledge of the talks have said.

Lehman Brothers analyst Evren Ergin also said today that GM and Chrysler may be required to shed parts of their truck businesses to win Justice Department approval. Any plan to combine pickup truck production would be scrutinized because of the automakers' high market share, Ergin said in a report.

Chrysler's Dodge Ram and GM's Chevrolet Silverado large pickups were two of the five best-selling vehicles in the U.S. last year, according to Autodata Corp.

A car division merger between GM and Auburn Hills, Michigan-based Chrysler might not face such obstacles because the U.S. automakers are only ``moderately concentrated'' on their home turf, said Nesvold, who has a ``peer perform'' rating on GM shares.

 Passenger Cars

``Barriers to entry in passenger cars are relatively low,'' Nesvold said, citing U.S. market share gains by Asian automakers.

A GM-Chrysler venture to share technology or vehicle platforms may be more likely than a merger, Nesvold said. ``Such less-permanent tie-ups don't always trigger antitrust violations,'' he wrote.

Shares of Detroit-based GM fell 7 cents to $32.18 at 4 p.m. in New York Stock Exchange composite trading. They have gained 4.8 percent this year. U.S. shares of Stuttgart, Germany-based DaimlerChrysler rose $1.47 to $82.67 and are up 49 percent so far this year.

GM's 8.375 percent note due July 2033 fell 1 cent to 91 cents on the dollar, yielding 9.29 percent, according to Trace, the NASD's bond-price reporting service. DaimlerChrysler's 8.5 percent note due January 2031 fell 0.25 cent to 126 cents on the dollar, yielding 6.36 percent, according to Trace.

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