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A GM-Ford Marriage

It's been discussed

How desperate are things in Detroit? At a recent management meeting, a senior General Motors (GM) executive floated the idea of approaching Ford Motor (F) about a merger, BusinessWeek has learned.

The idea was shot down quickly, says someone familiar with the discussions. But it's telling that anyone in the C-suite even brought it up. Ford and GM are burning cash and weighing their options if auto sales continue to free-fall. "I don't think a merger is likely," says David E. Cole, chairman of the Center for Automotive Research. "But you'll see a lot of options considered if they think bigger problems will come [along]."

A GM-Ford marriage has some merit. Merging the massive overhead of each company would save a combined entity billions. Their total cash hoard of nearly $50 billion could help them survive what most analysts expect to be a year or two of weak sales.

But when the idea came up, most in the room waved it away, saying a hookup would be a huge distraction at a time management needs to focus on a turnaround. Plus, a deal would double many problems, including an excess of plants that build gas guzzlers, brands that need repair, and losses in North America.

Putting such a deal together also would be incredibly complex. There are shareholders on both sides—including the Ford family, which has a major stake—to be considered. Billionaire Kirk Kerkorian is now Ford's largest independent owner. The union would want a say in what happens to all those factory workers. And then, what would you call the company? General Ford Motors just doesn't sing.

Welch is BusinessWeek's Detroit bureau chief.

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