GM global sales drop, merger talks progress

By Poornima Gupta and Soyoung Kim

DETROIT (Reuters) - General Motors Corp reported an 11 percent drop in third-quarter global auto sales on Wednesday and said it is reviewing upcoming vehicle production plans as it moves to conserve cash in the face of deepening global economic weakness.

The largest U.S. automaker continued to push forward with talks aimed at a merger with smaller rival Chrysler amid a report that GM had also reached out to Japan's Toyota Motor Corp for assistance.

GM shares rose as much as 11.7 percent and GMAC bonds rose as well following a Reuters report of progress in the GM- Chrysler merger talks and confirmation that auto and mortgage finance affiliate GMAC LLC had been approved to use the commercial paper funding facility created earlier this month to ease pressure on the corporate credit market.

Ford Motor Credit and Chrysler Financial also have applied for, and have been approved, for access to the commercial paper program.

GM's sales decline placed it squarely behind Toyota in global sales through September, although interest in that benchmark has been overshadowed by the threat that a deepening slump in sales poses to GM and the industry.

GM has been in talks with Cerberus Capital Management LP since September about a merger with Chrysler LLC, the struggling No. 3 U.S. automaker controlled by Cerberus.

Sources familiar with those discussions said on Wednesday the two sides agreed on the major issues, but the final form of any deal would depend on how much financing was available -- including U.S. government support -- and what form it would take.

Cerberus also is in its own set of discussions with banks to refinance $9 billion of Chrysler debt, the sources said.