GM, Chrysler Back on Track?

General Motors and Chrysler may be getting hitched after all. On a day of plenty of auto-sector news, the Wall Street Journal breaks the scoop that the two struggling automakers have reopened merger talks. The new development is that "Chrysler owner Cerberus Capital Management LP has signaled its willingness to give away part of its ownership in the auto maker" to get the deal done, the newspaper writes, citing people in the know. It's hard to know how serious Chrysler's owner is about negotiating a second round of merger talks in a month.

Perhaps the carmaker wants to show Washington it's serious about restructuring, a necessity if it's going to receive federal bailout money. Those negotiations for a bailout of GM and Chrysler, now being spearheaded by Treasury Secretary Henry Paulson, the New York Times writes, are still far from resolved. The Bush administration is keen to work out a plan by Christmas to provide the two firms with up to $14 billion in bridge loans to help cover operations through the first quarter of 2009. But for once it seems Washington plans to be a tough negotiator. "Giving them enough money to limp along doesn’t solve anything," a senior administration official explained to the NYT.

Chrysler and GM are taking some bold steps to cut costs and present lawmakers with a slimmed-down, new-look version as they await a verdict on their bailout. On Wednesday Chrysler announced it would shut down all its North American production for at least one month starting tomorrow, Business Week writes. And how is GM showing it can cut costs to survive? It is halting the completion of an engine factory for its Chevy Volt, one of its most highly anticipated new models, which it hoped to have in showrooms by late 2010. GM tells the Detroit Free Press it had no choice. The company needs to preserve cash wherever it can.

Automakers got some unwelcome news from OPEC yesterday. In an effort to prop up the price of crude to $75 a barrel, the oil-producing cartel slashed output by a record 2.2 million barrels a day. And the market's response? The price of crude fell yet again. In fact, oil dipped below $40 a barrel in Asian trading this morning, Reuters reports. Evidently, the market has OPEC over a barrel. "The market is saying to OPEC, 'You really didn't do your job. If you want prices to go higher, we need a bigger cut in supply,' " Addison Armstrong, chief market analyst for Tradition Energy in Stamford, Conn., told the Houston Chronicle. "They set the stage for an oil price drop to $30." The plunging price of oil shouldn't necessarily be read as good news. Fears of a paralyzing global recession have all but decimated demand for oil, reigniting fears of deflation, CNNMoney writes.

And now to today's white-collar-crime beat. The criminal case against disgraced financier Bernard Madoff grows more complicated by the day. According to Bloomberg, investigators have now zeroed in on Bernie Madoff's wife, Ruth. U.S. regulators want to know if Ruth Madoff "maintained secret records used in [the] $50 billion Ponzi scheme," Bloomberg writes, citing "a person familiar with the matter." Some suspicious payment-tracking files have surfaced as have some transactions in which she signed, the news wire says. She was forced to turn in her passport yesterday while he remains under house arrest. Meanwhile, the fallout grows. The Financial Times writes that Fairfield Greenwich, described as the biggest loser in the alleged Madoff fraud with clients' exposure to Bernard L. Madoff Investment Securities pegged at $7.5 billion, is considering suing its own accountants at PricewaterhouseCoopers for failing to spot the malfeasance. It might not be just PwC that faces legal threats. "With three of the four biggest accountancy firms—PwC, KPMG and Ernst & Young—auditing the Madoff feeder funds, lawyers say the asset-rich firms are likely to be targeted for legal action," the newspaper writes.

Meanwhile, the heat on the Securities and Exchange Commission over the Madoff mess grows. On Wednesday, SEC Chairman Christopher Cox said his agency had found no evidence that any of its employees acted improperly in not catching the fraud before Madoff himself confessed, Bloomberg reports. And yet new documents show Madoff misled the SEC as recently as 2006, the WSJ reports today in detailing the failed decadelong crusade of a former business rival, Harry Markopolos, who was convinced Madoff was defrauding clients and misrepresenting his firm. The WSJ takes a look at the 2006 SEC probe into Madoff that concluded he withheld information about customers' accounts, that he failed to identify himself as the investment adviser, and that he failed to register with the SEC. And the verdict? Madoff was instructed to register his investment advisory firm. Case closed. "The SEC report said the staff closed the case 'because those violations were not so serious as to warrant an enforcement action,' " the WSJ reports.

With the finger-pointing at the agency no doubt expected to intensify, perhaps it's time for new blood. Today, President-elect Barack Obama is expected to announce Mary L. Schapiro will replace Cox and take over as chairwoman of the SEC, the NYT reports, citing well-connected Democrats (and giving a nod to Bloomberg as the agency that first broke the news). She is expected to face a tougher-than-usual confirmation hearing in the Senate, "some of whose members have been critical of how the S.E.C. performed in overseeing the faltering investment banks this year."

And finally, there is one piece of the Washington establishment that is getting smaller: newsrooms. The NYT rattles off the startling decline of journalists covering Washington as financially hurting news outlets can no longer afford to keep their D.C. bureaus running. Shortly after Obama's inauguration, Cox Newspapers—publisher of the Atlanta Journal-Constitution, the Austin American-Statesman, and 15 other papers—will shut its Washington bureau, joining Advance Publications, owner of the Star-Ledger of Newark, the Cleveland Plain Dealer, and other papers that have already closed up shop. "The times may be news-rich, but newspapers are cash-poor, facing their direst financial straits since the Depression. Racing to cut costs as they lose revenue, most have decided that their future lies in local news, not national or international events. That has put a bull’s-eye on expensive Washington bureaus," the newspaper writes.