Ahead of the Bell: Auto merger momentum swells

NEW YORK - Investors are watching what role the U.S. government will play in any merger among automakers as downgrades from credit ratings agencies indicate their financial condition is weakening.

Reports continued to surface Monday over the possibility of a marriage between General Motors Corp. (nyse: GM - news - people ) and Chrysler LLC. The Wall Street Journal reported on its Web site that the U.S. Department of Energy is trying to free up $5 billion of a $25 billion federal loan package to help make a GM-Chrysler deal work.

Meanwhile, the White House said Monday that the financing arms of the automakers might be eligible for federal help under the bank stock-purchasing portion of the government's $700 billion financial rescue package.

The growing momentum toward consolidation comes as ratings agencies continue to raise questions about the auto industry's financial health. Late Monday, Moody's (nyse: MCO - news - people ) Investors Service sent its ratings on GM and Chrysler deeper into "junk" status, and Ford Motor Co. (nyse: F - news - people ) on review for a possible downgrade.

Tumbling vehicle sales and dwindling cash piles is putting increasing pressure on automakers to come up with a solution to stave off bankruptcy filings. Shares of Ford have lost 70 percent since the start of the year, closing Monday at $2.03. In premarket trading, the stock is up 3 cents.

GM shares have plunged 78 percent and finished at $5.45. The shares jumped 45 cents, or 8.2 percent, in premarket action.

Chrysler has not been publicly traded since private-equity firm Cerberus Capital Management LP took the company private last year.

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