By on February 28, 2007

chrysler-crossfire22.jpgWhen DaimlerChrysler unveiled Project X, the media was abuzz. Chrysler’s turnaround strategy included eliminating thousands of jobs, slashing vehicle production by a quarter and mothballing its Newark factory. More ominously, the plan pledged to consider “any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler." To tell the truth, DaimlerChrysler’s “Recovery and Transformation” document should have stated the management’s desire to explore “any option to pump and dump Chrysler.” Those alternatives are gradually coming into focus. First, here’s what’s not going to happen…

DCX isn’t going to spin off the Chrysler Group. Dresdner Kleinwort Wasserstein analyst Arndt Ellinghorst estimates DCX would have to cough up $11b to cover Chrysler’s liabilities before flotation. After deducting health care liabilities, Morgan Stanley’s mavens value Chrysler’s automotive operations at around $9b, and their financial unit at $7.6b. Spending $11b to jettison a company with a net value of $16b doesn’t compute.

Plan A: sell Chrysler to a private equity group. To that end, Chrysler’s German overlords have commissioned J.P. Morgan to prepare a prospectus for an eventual auction. Fresh from cherry picking GM (i.e. buying 51% of their GMAC finance arm), our three-headed pals at Cerberus are in the hunt. Apollo Management, the Carlyle Group and the Blackstone Group are also reportedly interested.

If an investment group ends up owning Chrysler, it’s only a matter of time (a week?) before they break up the MoPar Pentastar and sell the pieces– from existing inventory to entire assembly lines. Chinese carmakers (who couldn’t afford to buy the company) would be lining up for the Mother of All Garage Sales.

Plan B: sell Chrysler to an automaker. According to press reports, Hyundai, Renault/Nissan, VW, FIAT, Mitsubishi and (for all we know) Nikolai Smolensky have all examined the possibility of buying the Chrysler Group and decided there are better– or at least slower– ways to kill themselves. There’s only one automaker brave stupid enough to take on Chrysler’s bloated dealer network, lackluster product portfolio, deeply entrenched union and enormous employee-related liabilities: GM.

Think about it: the above description applies equally to GM and Chrysler. A merger between the two floundering behemoths is about as sensible as two escaped convicts intertwining their leg irons so they can float downriver past their pursuers.

And yet, GM CFO Fritz Henderson is heading a team to contemplate the “synergy” this “merger of dunces” would create. It’s no secret (at least in these parts) that GM doesn’t have the cash to simply sign a check (and seal its doom). That leaves one possibility: an equity deal. And as ridiculous as THAT sounds, the arrangement would give DaimlerMinusChrysler around a 20% stake in GM.

DCX management could save face with stockholders without losing “real” money. Chrysler Group would be “saved” by GM. GM would gain segment-leading minivans and Jeeps. And more dealers than a crack convention. And enough terminally ill product lines to keep automotive historians busy for decades.

None of this bodes well for Chrysler. Or GM. Or Daimler.

Assuming Porsche buys VW, DaimlerWhatever will become Germany’s smallest stand-alone automaker. Analysts at Banca IMI hint that equity investors and financially flush hedge funds are already sniffing around. Talk about irony: fending off a hostile takeover was one of the major justifications for the DaimlerChrysler “merger of equals.” Without Chrysler, Daimler Benz is right back where they were in 1998.

If Daimler found itself on the receiving end of a hostile takeover, the irony could be compounded. Industry analysts see Daimler stripped into pieces, split into separate car, truck, and van businesses. Of course, this is all speculation. But six months ago, who would have thought Chrysler would be on the auction block?

Despite the enormous implications of any change of ownership at Chrysler on the United Auto Workers (UAW), the union remains uncharacteristically quiet on the subject. The obligatory UAW press release on Chrysler’s 13k job cuts payoffs reads like boilerplate: “Today’s action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities.”

When asked about the possibility that GM could “buy” Chrysler, UAW president Ron Gettelfinger responded “I have absolutely no opinion on that at all.” This despite the fact that many of his members see Chrysler’s "alleged" sale as nothing more than a “threat” (i.e. a ploy to gain contract concessions). Gettelfinger, who sits on DCX’ Board of Supervisors, was equally nonplussed about a Chrysler auction. "It may end up that it's not sold. Who knows?"

Fair enough. With all these (and more) potential scenarios, no one can predict what will happen to the once-proud Chrysler Corporation. DCX better be checking their six, though. In their zeal to rid themselves of their American albatross, they may be setting themselves up for a fall. You know what they say about payback.

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63 Comments on “Chrysler Suicide Watch 9: Bad Carma?...”


  • avatar

    What a mess! Understanding all that is wrong in Detroit is like trying to track particle behavior at the cutting edge of quantum theory, minus any logical rules or laws. I simply refuse to believe that GM will be buying Chrysler. The move makes absolutely no sense and does not even seem plausible, given the current status of both companies. Have the 2.5 gone completely mad?

  • avatar

    Chinese carmakers (who couldn’t afford to buy the company) would be lining up for the Mother of All Garage Sales.

    ^^ This is why GM would think about buying chrysler. To prevent the Chinese from entering the market as quickly.

  • avatar
    shaker

    While I understand that too much knowlege can be a bad thing, I’m sure that the UAW serves its own intresets well by insulating its membership from these machinations. If said members even had an inkling of the buzzards that are circling, would their common sense overrule greed and possibly save an industry?

  • avatar
    David Peterson

    Wow! If I had the worldview Mr. Williams professes, I should be in the john at the local ZipTrip with a belt around my arm, contemplating my release. You do not take into consideration the realpolitik involved in the breakup of a historical entity like Chrysler. I would actually enjoy seeing these red velvet assholes like Cerberus or Blackstone trying to explain to a house committee why they are breaking up that old “Gang of Mine”, while 100,000 angry workers march outside on the Mall. Ah, it warms my Socialist heart. All we would need would be Bonus Marchers’ ghosts.

  • avatar
    JJ

    Assuming Porsche buys VW, DaimlerWhatever will become Germany’s smallest stand-alone automaker.

    Tecnically I believe BMW would still be a little bit smaller than a would be standalone Mercedes at this point. However, at the current rate Mercedes is loosing sales to BMW, that wouldn’t take very long.

    I do understand Mercedes’ aversion against the losses at Chrysler. Bankruptcy/solvability problems have never helped a brand’s image, and especially Mercedes should be very worried about this, because their image is the only thing they have left that sells them cars…

  • avatar
    tom

    Daimler-Benz has a history of great failures when it comes to aqusitions, but they’ve also always taken drastic measures to get back on track, unlike most other companies.

    Back in the 1980s, former Daimler-Benz CEO Edzard Reuter was dreaming of a great conglomerate and acquiered AEG, a big German electronics company. But after it turned out to be bottomless pit, thousends of jobs were cut, AEG then sold and ripped apart.

    Another example is Daimler-Benz Aerospace. Daimler acquiered doomed aviation companies like Fokker and Dornier (Mr Schrempp was responsible for those deals, remember him?) Those companies were killed off and the remains merged with MBB (former Messerschmitt) and spun off to form the Daimler-Benz Aerospace AG (DASA). DASA then was brought in to form the EADS (European Aeronautic Defence and Space Company) where DCX still holds about 20% although its share is ever decreasing.

    I could see a similar approach here. DCX could spin off Chrysler and sell part of the remaining company to private equity funds or other carmakers like GM while still keeping something between 20 and 50 percent of Chrysler.

  • avatar

    No comment on the Magna rumours?

  • avatar
    SuperAROD

    Kurt, I was about to say the same thing. This article makes no mention of Magna rumors. Magna owning Chrysler could be by far the best outcome on this deal.

  • avatar
    jaje

    If GM buys Chrysler it’ll be akin to 2 drowing swimmers who managed to struggle towards each other and embrace pulling each other and drowning faster than they would have on their own.

  • avatar

    Kurt B:
    No comment on the Magna rumours?

    According to the experts at Citigroup, Magna is committed to maintaining a debt-free balance sheet. While they certainly have the cash flow necessary to float a deal like this, they most likely wouldn’t want to acquire Chrysler as a whole because of the debt they’d encumber. They’re most likely interested in parts of Chrysler (electronics, engine production, stamping facilites) they could leverage to expand their parts empire.

  • avatar
    GCH

    There is another reason for GM to “buy” C. There is not room in the marketplace for 2.5 major US manufacturers. One of them has to go. This has been the problem all along although nobody seems to want to talk about it. One of them has to cease to exist. If GM buys C, Ford is doomed.

    GCH

  • avatar
    seldomawake

    Great article. As someone who has increasing interest in the Way of the Businesses World, I can't help but smile.

  • avatar
    frontline

    Crazy as a fox? The GM Chrysler merger could expedite bankruptcy!!!

    A fresh start for both!

    Is this a feasible scenario?

  • avatar
    cheezeweggie

    Who would want to buy into the UAW ? Slaughter the cow and sell the best cuts to the Hyundai and Chery.

  • avatar
    cheezeweggie

    Plan X:
    Buy Chrysler.
    Sell off all US manufacturing infastructure to Chinese/Korean manufacturers.
    Retain Jeep brand.
    Keep Mexican Assy plants.
    Sub contract parts production to lowest bidder regardless of nationality.
    Build Jeep product and Re-badged Jeep (Ram) pickup in non-union Mexican plants.

  • avatar
    Windswords

    This looks like it may play out as some at Allpar.com have stated in there blog. I saved this quote (I think it was from the Dave who I believe runs the site but I’m not sure):

    “Any merger would be fraught with problems as Mercedes relies heavily on Chrysler for its revenue. There’s the consulting fees, the royalties, Chrysler Financial, and the engineering work done in Auburn Hills (presumably at no cost) for Mercedes. Daimler would collapse without Chrysler, regardless of what the Germans and analysts like to say, because it survives by sucking cash out of its American industries, and Freightliner is drying up fast. Mercedes’ thirst for ill-gotten dollars could be quenched pretty quickly, though, with another “merger,” and a deal could include some provision for a cash flow to Stuttgart via royalties for a certain number of years, as well as the use of DAIMLERchrysler Financial for a certain number of years, to allow the Daimler parasite time to find another host. ”

    If there is any truth to the stament above then Daimler is going to do two things: hold on to Chrysler and pump up the stock with all these rumors and machinations while continuing to suck money out of it OR they will sell off an interest in the company or some shared arrangement that will allow them to continue to take funds out of the company for a specified period of time.

    As for GM – the question is what is a greater threat to them: trying to absorb Chrysler or watching the Chinese get a hold of it and its dealer network. Neither is good for GM but if they percieve that the latter is a greater threat and that a Chinese purchase is iminent then they will be forced to do it.

    I hope that Magna gets Chrysler, or if a private equity wants it, that they will try to revive it, maybe bring in Roger Penske or Tom Gale to run the company. The potential is there – if Chrysler became like they were in the 90’s they would be literally printing money. Then the private equity fund could sell it and make billions. It depends if they want to make a lot of money now or take a chance and make mega money later.

  • avatar
    Glenn A.

    Let’s face it, GCH, Ford is doomed anyway.

    It would be extremely ironic if Chrysler “survived” somehow, and Ford collapses. I think Lee Iacocca would probably laugh himself silly. Henry Ford II would probably be spinning in his grave at about 5000 rpm.

    I “suspect” that Daimler-Benz (or will be be “Daimler-Jeep”?) will keep the Jeep marque (Willys-Overland / then Kaiser-Jeep / then Jeep Corporation solely owned by American Motors Corporation then bought by Chrysler then bought by Daimler-Benz).

    I “suspect” that the only parts of Chrysler for sale are Chrysler, Dodge (a regional make almost solely sold in North America) and possibly Chrysler finance, along with the Chery cheap-ass car line in the offing (to be badged as a Dodge?).

    I think some current Jeep factories would be retained by DCX, but the car factories would “go” in the sale. The Jeep Compass, built in Normal, Illinois (in a car factory because it is a car, not a Jeep) could die and nobody would care.

    GM owning Chrysler? Someone wrote earlier in TTAC comments the best description I’ve seen so far – “It’d be like someone throwing an anvil into a leaky row-boat.” Exactly.

    Chevrolet – low priced cars, trucks, SUVs and Corvettes
    Dodge – middle-low priced cars with a supposedly sporty vein, trucks, SUVs and Vipers
    Pontiac – middle-low priced cars with a supposedly sporty vein (Hey, shove over Dodge!) – sold with GMC trucks & SUVs
    Chrysler – middle-class cars and SUVs
    Buick – middle-class cars and SUVs (Hey, shove over, Chrysler!) sold with Pontiac and GMC
    Saturn – um, greenish pale cars and SUVs for er, um, whom? College professors and ex-hippies?
    Saab – um, overpriced cars and SUVs for er, um, whom? College professors and ex-hippies with more money than Saturn buyers?
    Cadillac – overpriced Oldmobiles and Buicks with creased edges and V8’s? Why?! Not forgetting overpriced SUVs.

    Perhaps by getting rid of Saturn (it’s never made a penny anyway), Saab (crappy sales anyway), Pontiac (dying on the vine) and Buick (likewise) and even getting rid of Dodge trucks and GMC (GM need more stocks of unsold trucks & SUVs like a case of syphillis), it “might” make sense. But the company would go bankrupt before it “got there.”

    Chevrolet.
    Dodge.
    Chrysler.
    Cadillac.

    I have to say – I’ve read a fascinating book about the Packard Motor Car Company and in the book, in chapters which covered the era of Studebaker-Packard Corporation (Packard had money, bought Studebaker – the management of which had misrepresented the losses which dragged down both of them). At one dark point in the corporate history, Packard’s president was literally walking door to door from one corporation to another more-or-less begging for S-P to be bought up.

    Rumors were rampant. “Everyone from International Harvester to Chrysler to GM and Ford, were buying S-P.”

    The parallels to Chrysler’s current plight are – striking and frightening for my home state of Michigan, and thousands of workers.

  • avatar
    Windswords

    Glenn A.

    Great historical analysis. Two points: The Compass is built in Belvedier (sp?) IL along with the Caliber and Jeep Compass. The plant in Normal is still a Mitsubishi facility (I think – it’s getting hard to keep track of who owns what now). JP Morgan has valued each of the brands INCLUDING Jeep according to Autoblog so that would indicate that if Chyrsler is going to be broken up Jeep may be sold too.

    Interestingly Dodge is the highest valued brand at over 6 billion, which makes sense since Dodge alone sells over a million cars and trucks every year. Jeep is better known but doesn’t even sell half as many vehicles. Also I don’t see GM ever buying without Jeep thrown in- but who knows?

  • avatar
    Windswords

    Oops sorry I meant built in Belvedier (sp?) IL along with the Caliber and Jeep PATRIOT.

  • avatar
    Adrian Imonti

    Great commentary, Frank. It will be interesting to see how this ultimately plays out, and you’ve laid out some possible scenarios quite nicely. I concur wholeheartedly that a GM-based deal would simply be a disaster, another torpedo fired into the hull of an already sinking ship.

    I wonder whether in part, this talk of a spinoff might simply be a ploy to force concessions from the UAW. This could be a critical year for the union, given that its contract with Ford is coming up for renegotiation this September, while DCX is talking job cuts and a sale.

    Windswords, I would submit that the analysis presented from the excerpt on the allpar site is severely flawed. Let’s remember that Chrysler is a bleeding company, with revenues that are overwhelmed by even higher expenses, as well as a balance sheet loaded with substantial liabilities. Those revenue dollars that come in the door are effectively already spent before they are received, which is why Chrysler is in trouble in the first place. It is Mercedes’ operations that are subsidizing Chrysler’s, not the other way around.

  • avatar
    tom

    Winswords: Daimler would collapse without Chrysler, regardless of what the Germans and analysts like to say, because it survives by sucking cash out of its American industries, and Freightliner is drying up fast. Of course Freightliner is drying up, it has been integrated into the Mercedes-Benz commercial truck division after all. It's the thing that always happens when you transform a once independent company into another brand. That's like saying GM has been sucking cash out of Chevrolet. If we could finally get over the "merger of equals", it would become clear, that Daimler payed way too much for Chrysler. It was obvious back then and it's even clearer today. So if there's anyone who can be happy about the merger, it's former Chrysler shareholders. The potential is there – if Chrysler became like they were in the 90’s they would be literally printing money. This is true, but Chrysler has always had a cyclic development. And by 1998, when Daimler-Benz and Chrysler "merged", Chrysler was already on its way down, since there were literally no cars in the pipeline. Of course Mercedes didn't help either (with the exception of the 300 et al.) What Chrysler needs is attractive cars. So personally, I think Chrysler's best chances are still in the hands of Daimler. Daimler could provide the technology while Chrysler should go back to their great styling abilities which they seem to have lost recently. The question is if Daimler is patient enough and as I've said in my previous post, given the history of Daimler, I more and more doubt that Daimler will hold on to Chrysler.

  • avatar
    hal

    What makes you think that a Chinese automaker couldn't afford Chrysler? Don't you think a Chinese automaker would follow the route taken by Japanese and Korean automakers into the US market? In any case no one in their right mind would pay actual money for a lossmaking group with staggering liabilities and a stagnant market for its products. There is no way the automaking parts of Chrysler are worth a net $9B. At this point Daimler is looking for the least expensive way to get rid of Chrysler (and it's pensioners). Current Daimler management wasn't around when the DCX "merger" took place so they get to blame the whole ghastly mess on someone else, and Mercedes is better off alone, like BMW, free to enter into adhoc partnerships as required (like developing bluetec). For better or worse Daimler won't be broken up because it is a sacred cow in Germany. At least for a potential GM/Chrysler combo there is the opportunity to eliminate a lot of the overcapacity in the market precisely because there is so much overlap in their ranges, for Daimler there would be exposure to any potential upside and some less negative PR than if they just cut and run. Take a look at Rover post BMW to get an idea of what private equity types do to automakers.

  • avatar
    SuperAROD

    It is mentioned in several of the arcticles that I’ve read that Magna has a long term vision for their company and that owning Chrysler would fit that vision.

    I don’t think they excepted Chrysler to be up for sale, and I’m sure they would let their balance sheet go a little crazy for a while if it meant owning one of the largest automobile companies in the world.

    Do not dismiss the Magna rumors because you think they are too rigid to screw with their balance sheet to pass up a golden opportunity.

  • avatar
    Windswords

    Tom,

    We’ll have to agree to disagree.

    I for one believe that the losses that have been sustained at Chyrsler would not have happened if the “merger” had not taken place. But even if they had the rainy day fund that was set up in the 90’s would have seen them thru and they would have fresh product in the pipeline. Of course this fund was depleted quicker than a German division at the Battle of Stalingrad and the accounting for that money has never been certain. Now Daimler has said that they were misled by Chrysler management as to the health of the company but given that Daimler has been defending itself in courts across the world against charges of bribery, illegal movement of funds, and fraud, I doubt that they were the poor innocents they portray themselves to be. Rather, one can point to their general modus operandi of buying companies, sucking them dry, and leaving them to try to salvage what they can – Fokker and Freightliner being two examples.

    Of course Mercedes didn’t help either (with the exception of the 300 et al.) …Daimler could provide the technology

    Of course then there are the benefits to the acquisition. Access to Mercedes’ parts bin – which means nothing. Chrysler could have bought things like active suspension technology from anyone, along with ZF automatics. Instead they are dictated as to which parts they use. And when they do get parts from Daimler, they are limited by Mercedes’ marketing demands (e.g. to five speeds in the LX automatics). The Mercedes parts are also almost certainly more costly than what Chrysler could design itself.

    Then there’s access to Mercedes expertise. Well, that sure worked out well – Mercedes has ranked below Chrysler in JD Powers and they added three years to the development time for the 300 and who knows what othr vehicles.

  • avatar
    William C Montgomery

    Great article, Frank.

    As I read the comments, I am mystified why some think that GM would want to buy Chrysler to expand its dealer network. First, we all know what a stellar reputation Chrysler dealerships have for service and honesty – NOT!

    Secondly, GM can’t manage the dealership network that it currently has. GM already has too many dealerships too close together. Owning Chrysler would only exacerbate that problem. GM’s only advantage would be if all of the Chrysler dealerships shuttered up and went away. Maybe that is the plan…

  • avatar
    Steve_S

    I guess the questions should be what could possibly be the benefit to GM if they were to purchase some or all of Chrysler? Would it give them more power against the UAW since it would just be GM with 75% of all UAW jobs and Ford left? Would it help GM by removing a competitor and stopping the Chinese from grabbing it (sounds like good long term vision which I can’t believe GM is capable of)? Perhaps GM is hedging its bets that the government might allow GM to go down without help but not effectively GM and Chrysler. Perhaps something along the lines of “If you don’t let us modify the franchise laws and adjust the UAW contracts/health benefits then 200k plus American workers will be lining up for unemployment.”

    Would the US government even allow a Communist country to own something like the Chrysler Group?

  • avatar
    nino

    I think that a GM/Chrysler tie-up makes a lot of sense.

    Let’s say that GM aquires Chrysler, but Chrysler remains an “independent” company. GM could then “buy” from the independent Chrysler what they wanted; minivans, the Jeep division, a rear wheel drive platform, etc. The “independent” Chrysler could then file for bankruptcy. It would be a “dry run” for what GM could do down the road itself. In the meantime, GM would still be in charge of their business.

    If Chrysler comes out of bankruptcy a lean, mean fighting machine, I would assume that GM would be able to exert their control over the new reorganized company. They could then transfer their major assets from GM to Chrysler before letting GM go through the same thing.

  • avatar

    Windswords: JP Morgan has valued each of the brands INCLUDING Jeep according to Autoblog so that would indicate that if Chyrsler is going to be broken up Jeep may be sold too.

    Just for reference, here’s what Morgan Stanley says the individual parts of Chrysler are worth:

    * Dodge: $6.6 billion.

    * Jeep: $5.3 billion.

    * Chrysler brand: $3.2 billion.

    * Global operations, such as Chrysler’s stake in Magna Steyr: $1.4 billion.

    * Joint ventures, such as Beijing Jeep: $682 million.

    * Real estate, including the company headquarters, technical center and proving grounds: $1.4 billion.

    * Deferred taxes and overfunded pension assets: $7.1 billion.

  • avatar
    bythehour

    The real question is why anyone would want to buy Chrysler. If you want to continue selling the complete line, I could understand it. But, if you were only interested in the production facilities (i.e., the assets).

    It would make a whole lot more sense to let the dang thing sink and pick up the pieces at auction.

    So, I ask, why does GM “need” Chrysler?

    I say, let’s divide the pieces and move on….

  • avatar
    nino

    So, I ask, why does GM “need” Chrysler?

    A Chrysler that came out of bankruptcy would be a car company devoid of all the baggage that the big 2.5 carry now. If GM owned Chrysler, but maintained it as a separate company, I’m assuming they can allow Chrysler to go through reorganization and then still have control over the resulting entity.

  • avatar
    nino

    If GM owned an “independent” Chrysler, they would have a ready “buyer” for all their damaged divisions. GM wants to sell off SAAB, hey Chrysler could buy it. They can trade their Jeep division for both it and Buick. Eventually, Chysler could own all the damaged divisions while GM kept the healthy ones.

    Then Chrysler could file.

    This exact scenario has happened in the furniture retail industry and the supermarket industry.

  • avatar
    nino

    Another scenario could be where GM transfers all of its assets to Chrysler with its lower legacy obligations and smaller dealer network, and lets GM go through bankruptcy.

  • avatar
    Robert Schwartz

    If I were advising a buyer, I would say to him: The potential off-balance sheet liabilities to retirees, union members, and for environmental issues are off the charts. Tell them to file chapter 11 proceedings and we will bid in bankruptcy court, which has the power to sell to us free and clear.

  • avatar
    Windswords

    Steve_S:
    February 28th, 2007 at 12:45 pm
    “…Would it give them more power against the UAW since it would just be GM with 75% of all UAW jobs and Ford left? … “Perhaps GM is hedging its bets that the government might allow GM to go down without help but not effectively GM and Chrysler. Perhaps something along the lines of “If you don’t let us modify the franchise laws and adjust the UAW contracts/health benefits then 200k plus American workers will be lining up for unemployment.” ”

    nino:
    February 28th, 2007 at 12:47 pm
    …”Let’s say that GM aquires Chrysler, but Chrysler remains an “independent” company. GM could then “buy” from the independent Chrysler what they wanted; minivans, the Jeep division, a rear wheel drive platform, etc. The “independent” Chrysler could then file for bankruptcy. It would be a “dry run” for what GM could do down the road itself. In the meantime, GM would still be in charge of their business. ”

    Wow. This is getting ineteresting isn’t it? I didn’t think of those two scenarios. Of course this speculation is getting close to conspiracy theory territory but it’s fascinating to discuss and think about. :-)

    How about this: GM buys a 49% stake in CG ala what they did with GMAC. That gives them access to parts, platforms and engineering without some of the downside of ownership. This is out of my league. Maybe someone else can comment on the viability of such an arrangement?

  • avatar
    tones03

    I agree with GCH, market is getting very crowded. Eliminate a competitor and one less thing you have to worry about. Doing this the way of buying C, well I would not agree with. Go at it the Toyota way: build boring cars with great quality and have the marketing department make you look like the greenest company on the planet and watch the competition die.

  • avatar
    Mud

    A merger between the two floundering behemoths is about as sensible as two escaped convicts intertwining their leg irons so they can float downriver past their pursuers. That's gotta be one of the best lines I've ever heard.

  • avatar
    tom

    Windswords,

    Rather, one can point to their general modus operandi of buying companies, sucking them dry, and leaving them to try to salvage what they can – Fokker and Freightliner being two examples.

    Fokker was just an example for a bad deal. There was nothing to suck out of it, it was already dead.
    Freightliner however is doing all right. I don’t know where there is supposed to be a problem.

    Chrysler could have bought things like active suspension technology from anyone, along with ZF automatics.

    So why didn’t they do it? Or anyone else for that matter. If it’s that easy, then why can’t GM or Ford do it?

    As I’ve said before, I agree, that up until now, Mercedes didn’t do much to help Chrysler and if they keep on acting like that it will get worse before it gets better over in Auburn Hills. But I just don’t see any owner who would be better for Chrysler than a cooperative Mercedes. I mean realistically.

  • avatar

    Here’s another scenario to mull over. The financial unit seems to be the healthiest component of Chrysler. What if they sold it off, plowed that money back into the automotive side to offset some of the liability, and THEN went after an equity deal with GM or put it on the auction block. Do you think this would make them any more attractive to a prospective buyer?

  • avatar
    tom

    Frank,
    Here’s another scenario to mull over. The financial unit seems to be the healthiest component of Chrysler. What if they sold it off, plowed that money back into the automotive side to offset some of the liability, and THEN went after an equity deal with GM or put it on the auction block. Do you think this would make them any more attractive to a prospective buyer?

    That’s interesting, but I dont see it coming. First of all, by now the financial units of Daimler and Chrysler are truly ONE. So to split them up again would probably be quite a problem. Also, I’d say that to sell your healthiest unit is only an option when it’s a matter of life and death (eg GM). DCX however made 5 Billion € last year, so it’s hardly in any kind of serious trouble.

  • avatar
    Windswords

    As I’ve said before, I agree, that up until now, Mercedes didn’t do much to help Chrysler and if they keep on acting like that it will get worse before it gets better over in Auburn Hills. But I just don’t see any owner who would be better for Chrysler than a cooperative Mercedes. I mean realistically.

    Agreed – if Mercedes would be truly cooperative. The depletion of the rainy day fund, the court cases, and payment for Mercedes tech at a higher cost than the open market don’t sound like cooperation. I did have hope that after Dieter took over the reigns of the whole Corporation things would be better – he did seem to have a genuine high regard for Chrysler folk but I haven’t seen anything to come out of that except that under the new plans all the corporate V6’s are to be developed under Chrylser. Of course the Mercedes versions will have different heads or whatever is needed to make them seem like they are not the same engines – if this ever happens that is.

    But there’s more. There have been reports (which I admit I cannot verify) that Chrysler was forced to pay massive consulting fees to Daimler, even when they were assigned to help them on Mercedes cost reductions and quality improvements. Also that Chrysler had to pay royalties on parts they were forced to use. And lets not forget Chrylser Financial whose profits go under Daimler. This reminds me of the mafia – only it’s legal kind of extortion because Daimler is the “boss”. But one thing is for sure – this is not the vision of a merger of “equals”.

    Chrysler bears some responsibility for their predicament no argument there, but Daimler is the parent and a parent is ultimately responsible for the well being of their children, especailly a parent like this.

  • avatar
    omnivore

    Steve_S: Would the US government even allow a Communist country to own something like the Chrysler Group?

    Sure they would … they let Lenovo (a Chinese company) buy the PC division of IBM, which is at least as iconic an American company.

  • avatar
    tankd0g

    Maybe it’s time for the land of governmental hipocracy to buy out all three and federalize the car industry.

  • avatar
    Paul Niedermeyer

    All these Allpar speculations about Mercedes bleeding Chrysler with all kinds of fees is highly suspect. DCX is one company; the only benefit would be for tax reasons, if one country’s taxes were higher, to spread out the tax burden. Otherwise, its robbing Peter to pay Paul, and in an on-going concern, that doesn’t make any sense.

    Daimler didn’t spend $38 billion to buy Chrysler ten years ago with the strategy to purposely bleed Chrysler and then have to give it away. Chryslers losses were to big for that to be a logical strategy.

    Allpar are Chrysler nostalgia-manics. They’re endlessly talking about how great Chrysler would be if only they hadn’t killed Plymouth. Right.

  • avatar
    Sajeev Mehta

    Allpar are Chrysler nostalgia-manics.

    That’s what I’m reading too. Which is okay up to a point.

    If “Mercedes relies heavily on Chrysler for its revenue”, why (among other things) don’t we hear about thousands of Benzes collecting dust in storage lots waiting for infuriated dealerships to take up the slack?

    DCX didn’t do this to Chrysler, tactics like their push strategy are to blame.

  • avatar
    Luther

    UAW president Ron Gettelfinger responded “I have absolutely no opinion on that at all.”

    Gettelfinger is the CEE of 2.5 (Chief Extortion Officer – Is there a higher position than that? Ask John Gotti.) and no doubt the principle behind the “Merger of Dunces”. He will do anything not to have Chrysler broken up into pieces by an Equity firm. The political ramifications of a buy-out breakup would be fun to watch…Having the Parasitic Scum in DC look over their glasses at CEOs like Mommy-n-Daddy dearest while wagging their fingers is always a laughable sight. Voters are children afterall.

    As is said, whenever there is cronic stupidity in business, look for the Government’s gun.

  • avatar
    NickR

    the losses that have been sustained at Chyrsler would not have happened if the “merger” had not taken place.

    I agree. Chrysler hasn’t done anything that it couldn’t have done without Daimler Benz.

    And having worked for a company that was taken over by a German company, I can see exactly what Chrysler went through. Out of touch, ill-advised edicts coming from Germany, while all the time trying to skim as much as possible.

  • avatar
    Landcrusher

    Someone correct me if I am wrong here:

    GM and Ford will not dissappear, merely go into bankruptcy protection and reemerge. It may be messy, but that’s what seems likely.

    Chrysler could do the same, except, it is owned by Daimler (thus the .5 in 2.5). How does this change the game? Is that why the UAW is quiet? What happens with their pensions if they are not sold off before they all get laid off? WIthout a sale, how can Daimler get out from under the obligations?

    How could Chrysler compete if Ford and GM could reemerge with less liabilities?

    American Airlines is now at a disadvantage competing with all their recently bankrupt rivals, but they are making it. Would Chrysler, having been sold by Daimler, be strong enough to do that? Or, would Daimler sell Chrysler at a price at which the new owners could pull it off?

  • avatar
    Windswords

    Sajeev Mehta:
    February 28th, 2007 at 3:39 pm
    If “Mercedes relies heavily on Chrysler for its revenue”, why (among other things) don’t we hear about thousands of Benzes collecting dust in storage lots waiting for infuriated dealerships to take up the slack?

    Umm.. who was the sales chief for Chrysler and where did he come from? Joe somebody…

    I also have a hard time understanding why Tom Lasorda unless he is a total incompetant, would keep building cars without dealer orders. You can have a little excess inventory but come on. Could it be that he and that Joe somebody been operating on instructions from somewhere else? I don’t know but it makes more sense than either of them just being stupid, especially when you consider that they were booking the sale when they made the vehicle – not when it was delivered to the dealer.

    Paul Niedermeyer:
    February 28th, 2007 at 3:11 pm
    Allpar are Chrysler nostalgia-manics. They’re endlessly talking about how great Chrysler would be if only they hadn’t killed Plymouth. Right.

    As for Plymouth, well that’s a great way to kiss 150,000 plus unit sales goodbye. Of course some were recouped by the other brands but just like Oldsmobile not all of them. As I said in a previous post a while back retreat is not a recipe for victory. And getting rid of Plymouth means we get to review cars like the Jeep Compass (Caliber) since they couldn’t sell it as Plymouth and it didn’t make sense as a Chrysler.

  • avatar
    Slouch

    The more I think about it the more “genius” a GM buyout of Chrysler is. Think about the time line here.

    step 1
    Buy another failing carmaker with massive legacy cost issues and a bloated dealer network.

    step 2
    Wait six months. While doing so buy everything you might ever want. New platform arcitecture, new plants, create new jobs, it doesn’t matter just flush flush flush your operating capital away.

    step 3
    Go bankrupt. Not kinda bankrupt we need government help but the kind that calls out for divine assistance. The kind of bankrupt people still living in huts with no contact to the outside world hear about. Be so far in debt that NASA has to calculate your liabilities.

    step 4
    Now throw yourself on the mercy of the government and beg beg beg your little hearts out at bankruptcy court while you jettison all of those nasty liabilities. Union contracts, dealers you don’t need, product lines that no one likes, all of you retirees ditch em all and leave as a lean mean and profitable company.

    All GM needs to do in this is use the opportunity to shift its liabilities onto everyone else whether they be the government, banks, or shareholders. Think of it as dumping dangerous waste instead of treating it yourself by doing so you move the burden to the community and save yourself money this could be the setup for exactly the same move just with chemical being replaced with financial enviormental waste.

  • avatar
    rohman

    How ’bout this? As management is so incompetent and foreign car makers are so evil, why don’t the employees, with the assistance of their union, buy the company? With their skills and work ethic, surely they can turn this company around and provide great products. They will be able to increase their wages and add to their benefit packages. They are just poor victims of DCX and this is their chance to take control of their own futures.

  • avatar
    Luther

    You are being far to rational rohman…..

  • avatar
    rtz

    Where’s Kirk Kerkorian? Does he have any money burning a hole in his pocket? Can he profit off any of this?

  • avatar
    balance

    Frank Stronach having control of the Chrysler Group is about as likely as his daughter being a future Prime Minister of Canada … very possible indeed! Unlike Kerkorian, Herr Stronach has enough gas in the tank (willpower and vision) to be the next savior of Chrysler. Magna has of course already taken over the Graz assembly plant as well as the paint shop at the successful new Toledo Supplier Park – home of the hot Jeep Wrangler.

    While there are countless questions and “challenges” the end result will see a Mercedes/Chrysler/Magna arrangement because the benefits of such logic outweigh other scenarios.

    Of interest is that Lasorda; new#2 Steven Landry, and Magna are all Canadian. So is DaimlerChrysler Canada CEO Reid Bigland. And of the recently announced 13,000 job cuts only half of the 2000 in Canada are actually new.

  • avatar
    EJ

    A combined GM + Chrysler sounds like a classic consolidation in a shrinking business with overcapacity.
    Other than GM, who can buy Chrysler? Nobody, because nobody else can engage in a meaningful consolidation.
    GM will have to pull off a massive restructuring (it’s good that Gettelfinger is not commenting; it would be something like “Holy Cow!”) and organize the mother of all badge engineering with all those brands that are similar.
    It will probably be difficult to hold on to all customers of the combined company, so in the end GM may end up with the equation 1 + 1 = 1.
    But there is a positive, too.
    After consolidation, profitability can go up, especially on large SUVs and trucks.
    But here’s my big question mark: who will pay for the massive restructuring costs?

  • avatar
    jurisb

    guys , don`t you understand that american car companies always buy shares or merge with companies from which they can suck out hardware. ford bought mazda shares. why? to have access to mazda 6, and mazda 3 platforms. because ford is too primitive to build modern platform themselves. and now they say that in consumer reports first 8 out of ten are japanese and only 2 american cars. and guess what- those2 american cars are pontiac vibe ( ha ha ha what a purebred american) and ford/ fusion/ mkz/ milan. why reliable? because everything that needs there to be reliable like engine, chassis, gearbox- comes from japanese manufacturers.
    Gm doesn`t need chrysler, because there is nothing to suck out from chrysler.both are parasite companies that want to find host mothership from which to pump out anything that has more than to parts assembled together. does gm plan to pump out from chrysler mitsubishi lancer platform? or maybe suck out merc e-klasse platform? and chrysler plans to pump out opel astra platform from gm? looks like 2 bat vampires have found a swedish vegan table. now ford wants to mess around with advertisement spree. i guarantee, you willl fail. people buy cars, not promises. make your own cars, not mazda rebadges. if people wanted mazda they would go to mazda dealer`s not to ford`s to buy watered down mazda version. if people are patriots, they don`t go to mazda, they go to ford. and they find out that american fords almost don`t exist. so if they can`t buy american, they buy the best. they go back to mazda lot. for god`s sake americans, for how long you are going to simulate manufacturing instead of having manufacturing? no wonder i go to malls and the only place i can see proudly made in usa is on toilet paper or birdcages, or shaving foam. admit guys, your hands are too-burger -fat to manufacture sophisticated things. ( that`s why Bose can`t manufacture anything more than speakers, (oh, gee, digital screens and buttons are too hard to make), harley pushes hard on legend not on technology, and ibm slides into softie services not manufacturing. a dream country of googlers, and portfolios and branding, while the tangble creation of parts has to be done either by koreans or germans. lunatics@inbox.lv

  • avatar
    Glenn A.

    Wow, “slapage, hardage” jurisb.

    Unfortunately, from all appearances, you’d be right, though.

    My home state of Michigan is sinking, sinking, sinking.

    This, however, does NOT mean I am going to sell my Japanese produced Prius nor my South Korean produced Hyundai and buy a couple of “Detroit-Enron-mobiles”.

    Sorry, 30 years of getting screwed by the “big 3” and buying absolute junk means I won’t give them another chance.

    I love the idea of the UAW buying up Chrysler, BTW. C’mon, you guys always blame the management. Put your money where your mouth is, let’s see you try it. Don’t forget to leave the “works bank” in place, and demand higher wages and less work every time you sit down at the negotiating table with – yourselves. And we’ll see just how long Chrysler lasts, right? Right.

  • avatar
    cykickspy

    I just heard that if Chrysler were to be sold that they would not include Jeep. Therefore I highly doubt that GM would be interested in Chrysler as Jeep is probally the only thing GM wants. Maybe DaimlerChrysler could give away the Chrysler group!

  • avatar
    Glenn A.

    Don’t laugh, cykickspy. Chrysler “sold” it’s British operations (previously known as Rootes Group) to Peugeot in 1979 or 1980 – for ONE POUND STERLING. About $2.

  • avatar
    Luther

    jurisb:

    It is not that Americans lack the ability to manufacture it is that the freakin Gubbmint has made it virtually impossible to manufacture with their “laws”. It has become a huge potential liability to hire anybody in the USA and the Gubbmint has more concern for bugs, birds, and weeds than it does for humans. The retarded children have control of the US Gubbmint.

    I would think that Daimler would want to keep Jeep… Heck, I would. I would also think that Daimler would sell Chrysler to the UAW for $1 and that the UAW would decline the offer. Why buy the cow when you can get the milk for free. The UAW has zero ability to run a company which is why they resort to extortion. A labor union is nothing but a [legalized] parasite.

  • avatar
    SuperAROD

    If Jeep is not for sale, as it is being reported, it is even less likely that Chrysler will be sold to anyone. Jeep is the highest profile of the brands, and probably the most profitable.

    In the end, this is probably going to be much ado about nothing, and a way for Dr. Z to have pushed up the share price of Chrysler to give him some time to push through his plan of finally pulling off a real marriage here.

  • avatar
    NinerSevenTango

    Never forget, none of these players are doing business with their own money. They are compensated at levels that will leave them rich for the rest of their lives. They have no stake in the future of the company. They do not run the risk of personal bankruptcy or loss. They are politicians, chosen through a political process. They operate in a market heavily skewed by direct government intervention and regulation of every aspect of the operation. The logic and designs are what you would expect of corporate lawyers and MBA’s.

    Part of that government intervention is the bankruptcy laws. There is no reason NOT to use them. I believe the maneuvering of all of the big 2.5 is asset management preparatory to filing for bankruptcy protection, with the assets fully out of reach of the bankruptcy court. There is no way any of them can pay the obligations that are on the horizon.

  • avatar
    hondaboy55

    Sorry for this, but I’d like to address is the use of or reference to “patriot” or Patriots. I forget who it was, Jefferson, Clinton, George Burns, or Homer Simpson, but one of them or someone else said something like this: ” The highest level of Patriotism is to question your government in all it does “.

    For several decades we have asked very few questions of our leaders, I don’t even refer to them as leaders, just morons in charge.

    Patriotism as a concept can apply to the purchase of a car, or some other item you will be paying for for quite a long time. Your being “patriotic” to your pocket, just as you would if you gave a crap about what your gov. does, by asking yourself the one most patriotic question: ” Am I doing the best thing I can for, or with, my hard earned money by buying this “XXYY” automobile?” Am I truly being Patriotic to this country, or my neighbors by buying “XXYY” automobile?

    To simply go out and “buy American with our “American manufacturers out sourcing as much as possible to build their “American” cars is beyond foolish, your Loyalty is not being returned.

    Today, to buy a Honda, Toyota, Nissan, (and others) you are buying from a Patriotic company in more than one respect. These companies have been patriotic to this country in answering many of the objections americans have raised over the last decades as they have gained acceptance in our market, and marketshare. They have been patriotic to the US and A by employing americans to assemble their cars, and to employ americans to build the parts that go into their cars.

    And most importantly, they are PATRIOTIC to the consumers who buy their cars by providing the marketplace with OUTSTANDING value, craftsmanship, dependibility, and for the most part above average business ethics both in and out of company.

    Unfortunatly most people don’t know that one Ford may be a Mazda, or that some Mazda cars or trucks are Fords. In some cases I’m sure its also convenience that a ranger is also a b2000. If you question the average person’s attention to detail stay up one night and watch Lenno “ask the person on the street”, Although not conclusive many can’t name 15 states.

    I would like to see my town, county, and state governments be more patriotic to my pocket, and to our local workers and buy Toyotas, Hondas and Isuzu trucks. They would last longer, and employ more US and A’ers.

    This comment is for you “jurisb” today, but I have seen these “patriotic” comments many times here, so it applies to all who use the Patriotic Buy American thinking. Respectfully, you guys need to open up your eyes, and think about Patriotism as a broader concept than just “buy american”.

    Later.

  • avatar
    balance

    “Magna chief prepares for Chrysler rescue” – Automotive News (March 5)

    … like I said … give it 6 to 8 months.


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