Speculation that General Motors could be on the verge of a merger deal with Chrysler sent its shares up sharply yesterday.

GM shares rose nearly 9 per cent to $6.81 in afternoon trading after it was reported that difficulties in the attempted merger had been solved.

GM has sought $10 billion (£6 billion) from the US Government to help to seal the merger, which is seen as important for both ailing companies.

There was also speculation yesterday that GM, whose third-quarter sales were down 11 per cent year on year, was seeking talks with Toyota, which could include asking the Japanese manufacturer to buy assets.

It is thought that if GM takes over Chrysler, more than 35,000 jobs could be cut. The two car companies' markets overlap significantly and the only way to make the merged group stronger would be to rationalise.

Chrysler is owned by the private equity group Cerberus, which bought the carmaker last year. Cerberus owns 51 per cent of GM's financing arm, GMAC, and it is believed that it would want to take full control of GMAC in return for ceding control of Chrysler.

A takeover of Chrysler would consolidate GM's position as the world's biggest carmaker. Rick Wagoner, GM's chief executive, would be expected to lead the merged group.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax