GM and Chrysler set to merge

In a move set to be one of the biggest shocks in the world's car industry for decades, General Motors and Chrysler are reportedly considering joining forces.

According to the New York Times, talks between GM and Chrysler owner Cerberus Capital Management began over a month ago, with insiders claiming the chances of a deal are '50/50'.

Demand for the large SUVs and pickup trucks that traditionally formed the backbone of both makers' product line-ups has tumbled, as consumers shift towards smaller, greener, more fuel-efficient cars.

Only last week, GM was forced to issue a statement designed to quash rumours it was about to go bankrupt, and the maker is currently desperate to sell its increasingly irrelevant Hummer brand.

GM shares dropped too last week. At the same time, Chrysler shares have fallen from $43 per share last year to less than $5.

It's not clear as yet how the deal would work, though it's likely General Motors would become the dominant of the two, with Cerberus taking a stake in GM after the merge. Ultimately, the pair's dealer networks could be streamlined and jobs cut to reduce costs.

However, in another twist, it is understood that Cerberus is preparing to talk to the Renault-Nissan alliance if the deal falls through - an altogether different but no less shocking twist in the tale.

No information has emerged on that particular tie-up as yet, but one thing is certain - big changes are afoot in the car industry.

Mark Nichol