General Motors and Fiat Chrysler Automobiles (FCA) have turned to investment banks for help to deal with a stand-off as FCA seeks to force a merger with its Detroit-based rival, according to sources familiar with the matter.
GM is being advised by Goldman Sachs, while FCA is working with UBS on the matter, several sources said, with one adding that Morgan Stanley was also working with GM.
GM's board rebuffed a merger proposal from the Italian-American carmaker earlier this year and Chief Executive Mary Barra said last week she had no interest in a combination.
GM signed a letter of engagement with Goldman Sachs earlier this week seeking advice on FCA, one of the sources said.
GM Senior Vice President Tony Cervone did not confirm that his company was retaining Goldman Sachs or Morgan Stanley specifically on the FCA merger approach.
When asked about the matter, he said: "It would be inconceivable for General Motors not to be talking to any number of advisers about normal business operations, but I'm not going to list the issues one by one."
Spokesmen at FCA, Goldman Sachs and Morgan Stanley declined to comment.
Goldman Sachs, which has assisted Fiat on a number of deals in the past, acted as one of GM's defence advisers during a February proxy battle.
Meanwhile, FCA is working with Swiss bank UBS on its strategy, while Fiat's founding Agnelli family, which holds around 30 percent of FCA via investment vehicle Exor, is being advised by Lazard, the sources said.
A spokeswoman at UBS confirmed it had an ongoing relationship with FCA, but declined to comment on the General Motors situation.
Lazard declined to comment.
Marchionne - who turned 63 on Wednesday - has argued that the global auto industry needs a dramatic consolidation to share prohibitive capital costs.
Global rivals in the sector face mounting costs to engineer vehicles that emit little or no carbon dioxide, and can avoid collisions using complex robotic driving systems.
FCA's move on GM also comes amid concerns that the industry is heading for a downturn which would hammer company valuations.
"For Marchionne it's now or never," an industry banker said, saying that industry valuations had reached their peak.
The problem facing Marchionne is that FCA is much smaller than GM, which has a market value of about $57 billion and annual revenues of around $156 billion.
FCA, the world's seventh-largest carmaker with a market capitalisation of $20 billion, reported revenues of 96 billion euros last year. It has one of the highest debt piles in the industry, with net industrial debt at 8.6 billion euros.
Much of FCA's market value is tied up in Ferrari, fawhich Marchionne has often described as a "phenomenal carrot" to investors.
Sources close to FCA said any merger with GM would not include Ferrari since the Agnelli family wants to retain control of the luxury unit and go ahead with a listing plan.
John Elkann, the scion of the Agnelli family who acts as FCA chairman, also wants to retain a minority interest in a combined entity with GM, the sources said.
Ferrari was initially set to hit the stock markets in the first half of 2015, but FCA subsequently pushed the listing back to at least mid-October.
Industry bankers say FCA needs to hold on to its current equity value while negotiating a potential deal with GM.
Marchionne, who took over as CEO in 2004 and rescued both Fiat and Chrysler, is a notorious risk taker.
While a hostile move for GM is seen as a long shot, Marchionne is trying to lobby investors to support his case that GM and FCA would be better off merged, the sources said.
The combined entity would be able to spread the high costs of developing vehicles, including greener and more high-tech cars, the sources said.
The mechanics of a hostile bid look "beyond ambitious", Bernstein analyst Max Warburton said in a note, while adding: "Stranger things have happened, especially in bubbly equity markets."
GM does not have a single controlling shareholder, and its top investor is Brock Capital Group with an 8.7 percent stake.
Brock Capital is the fiduciary that manages the shares for the United Auto Workers healthcare trust for retired workers. Analysts said the U.S. labour union would view a GM-FCA merger with scepticism because of the potential resulting job losses.
Meanwhile, hedge funds control around 6 percent of the shares.
Based on expectations that shareholders would demand a 35 percent premium to GM's market capitalisation, FCA would need to pay about $77 billion in an all-stock transaction in the event of a hostile bid, the sources said, adding that GM shareholders would likely demand a substantial payout.
But FCA would be under enormous financial strain if it decided to pursue a hostile bid, the sources said.
Some bankers argue that Marchionne - widely seen as an aggressive dealmaker - is unlikely to let that stop him and his chairman, Elkann, said in May the carmaker would "act with determination" if it found a target that "made sense".