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Report Says FCA's Marchionne Still Pursuing GM Merger

(Adds comment from GM)

MILAN, Aug 31 (Reuters) - It would be "unconscionable" for Fiat Chrysler Automobiles (FCA) not to pursue a merger with rival General Motors and create a company that can generate $30 billion a year in cash, FCA chief Sergio Marchionne said in a newspaper interview.

GM's board rebuffed a merger proposal from the Italian-American carmaker earlier this year. The rejection has not stopped Marchionne from working on the plan and lobbying GM investors in an effort to drag the GM board to the negotiating table, sources told Reuters in June.

In an interview published on Sunday on the website of Automotive News, Marchionne said he had studied every detail of a deal that would result in "cataclysmic changes in performance" and "it would be unconscionable not to force a partner."

The issue facing the FCA board at present was that "an attack on GM, properly structured, properly financed, ... cannot be refused. You can play hardball to a point," Marchionne said. "It's too big to ignore."

GM said in a statement on Monday that its current plan remained the best strategy to create value for its shareholders, even after an in-depth review of a possible merger with FCA.

Asked about a possible hostile takeover of GM, Marchionne said: "Not hostile. ... There are varying degrees of hugs. I can hug you nicely, I can hug you tightly, I can hug you like a bear, I can really hug you. Everything starts with physical contact. Then it can degrade, but it starts with physical contact."

Marchionne said FCA had received approaches from other potential partners that would be interested in discussions, but GM remained by far the preferred option.

"There are people who are interested in doing deals. I'm not interested in doing deals with them ... because there's a better deal," he said. (Reporting by Valentina Za in Milan and Edward Taylor in Frankfurt; Editing by Susan Fenton)