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By completing a merger with Chrysler, General Motors could access the cash it needs and negotiate more labor savings with the UAW, a JP Morgan auto analyst told the Detroit Free Press.

Investors have responded negatively to the potential tie-up so far, because the automakers are perceived as having the same weaknesses.

 

While a merger between GM and Chrysler is viewed as a “high-risk transaction from an operational perspective,” J.P. Morgan analyst Himanshu Patel said such a transaction might give GM the leverage it needs to negotiate with the UAW and its banks.

 

“By saving Chrysler from a liquidity event, GM may also be able to get itself the much needed secured bank financing from the same banks that are currently holding Chrysler debt,” Patel wrote.

 

In addition, he said GM may also use a merger to renegotiate parts of its 2007 UAW labor contract.

 

UAW President Ron Gettelfinger last week said he would oppose any merger that eliminated jobs. Other world labor leaders also said they would oppose such a match-up for the same reasons.

 

GM shares were trading up 6 cents, or 0.9%, at $6.49 late this morning.

 

 

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