Any takers?

The Jeep brand and the Chrysler minivan designs are worth something and would be greatly improved by GM engines–and transmissions in the case of the minivans.

Press accounts that have sources close to the merger talks aren’t suggesting this.

It would also be well out of line with Cerberus’ original plan, which was to outsource a lot of the manufacturing, and to focus on marketing and distribution. They never wanted to be a traditional auto company.

A structure could be put together where there is a public float of thousands of shareholders, but Cerberus continues to hold effective control of the company. In one fell swoop, Chrysler buys a hundred billion dollars worth of R&D and a number of newer production facilities, and in the process gets a structure “too big to fail.” Cerberus gets rid of the current GM Board of Bystanders, and in its place allows “Dean Bob” Nardelli and his cost cutting crew run the show.

The problem with this scenario: GM will need a lot more than $11 billion to become healthy again. Where is the new money going to come from? Good question, I don’t have the foggiest idea, unless that Exxon rumor is true.

Of course, GM will need a lot less money if it goes through a cleaning Chapter 11 bankruptcy. GM says it is not planning for a bankruptcy. That doesn’t mean that others aren’t doing contingency planning for a GM bankruptcy. If the majority of what is now General Motors can be picked up in bankruptcy court within a few months for a few billion dollars, I can think of no entity better placed to retain customer good will & confidence than a currently-operating automaker which promises at the outset to take over GM warranty obligations and keep the company operational. And if it proves impractical to keep up GM goodwill, Chrysler can incorporate the best GM models into it existing Chrysler family of brands, and jettison the rest — sort of a reverse version of the assimilation of Chrysler that has been recently discussed.

It would be better if this reverse mortgage were to be within the framework of a “prepackaged” bankruptcy, but a quick post-filing plan might also work. GM files Chapter 11. A plan is immediately filed for Chrysler to take over the operation of GM net of certain dealer commitments, union contracts, and other baggage, but with payment to creditors of several billion dollars by Chryslerberus. Exxon-Mobil and the Federal Government dump $20 billion new money into the combined and debt-clensed GM-Chrysler, and the next thing you know you have a going-concern company that has a broad product line, is properly capitalized, has a realistic cost structure, a broad technological base, a pared down dealer structure (with room for improvement) and has a huge base of stakeholders who will be unwilling to see the company fail.

See, simple.

While I haven’t had personal experience with the ENVI vehicles, I don’t see any evidence that they are “smoke and mirrors” either. As such, that is merely opinion.

To say that there is nothing in the pipeline and that development has stopped is clearly incorrect, since dealers have already seen examples of the new LY cars and the new Grand Cherokee (which reportedly will also share platform with at least a Dodge variant). To blatantly state that there is no ongoing development appears disingenuous at best.

“Most the products you mention were already in development when Cerberus took over. The rest of them– ENVI, Project D, EV minivan, etc.– are smoke and mirrors.”

We’ll have to agree to disagree. While many of these projects were in progress at the time of Cerberus’ aquisition of Chrysler if the plan was to save cash and not develop product then they would have shut them down. If that was not the plan and now it is then the stoole pidgeons inside the company (and they are there) would have alerted the blogosphere to the fact that they were shutting them down. It hasn’t happened. You mentioned project D, I forgot about that one, and I believe it was started after Cerberus took over. Not much has been done there but the fact that it was initiated at all tells me that they knew they had a problem with the D segment cars and they were going to do something about it. The only reason that project D seems to be “smoke and mirrors” is that the sales have tanked and the money has dried up. Cerberus figures they can do someone elses platform for cheaper. I think they are wrong but I don’t get to call the shots. I also forgot about the axel plant they built. And the Hemi update. The facts are just not fitting the scenario in my mind.

Any speculation that a combined Chrysler/GM will control 30% of the US market is outlandishly optimistic. The 10 billion dollar cost savings quoted in today’s Wall Street Journal that would result from the merger is pure fantasy.

If GM’s Board has any integrity left they’ll nix the proposed merger.

I believe that it is extremely presumptuous to assume that most or all of the cash that is currently on Chrysler’s balance sheet is going to stay there if it is sold to GM.

If that was the plan, then there would be little point in selling it. Presumably, Cerberus wants to preserve as much of its original cash as possible, and that obviously won’t happen if they hand all of it to GM.

On the other hand, I completely understand why JPM would be highly motivated to see Cerberus handed off. They need to protect their collateral, and Chrysler as a standalone may not be large enough to be “too big to fail.”

Like Pch101 says, follow the money. And that’s money on the balance sheet of Chrysler today which GM needs now. Acquiring Chrysler will take no money out of the kitty, GM will just continue to operate Chrysler exactly as it’s being run today – for the time being. Later, with government money, GM will close a bunch of plants and buyout the UAW workers. As for Chrysler dealers – well good luck to them, but it’s not inconceivable that they’ll also be bought out later.

In other words, extortion with menaces.

I see no evidence that a deal to acquire Chrysler would leave much, if any, cash in the deal for GM.

Cerberus will be motivated to prevent further bleeding and to preserve its capital. It’s not simply going to hand over all of its cash to GM.

On the Cerberus side, the deal seems driven by JP Morgan Chase, which is one of its primary lenders. They know that a BK will damage them; the federal government must know this, too.

On the GM side, I would suggest following the money. Figure out who the institutional bond holders are, and that might tell you who is most motivated to do this deal.

http://www.bloomberg.com/apps/news?pid=20601087&sid=akq1xS5z2JnA&refer=home

Ken, that article makes a scary kind of sense.
And I will throw in again that GM “leadership” really would like (needs?) to be numero uno in el mundo again.

I suspect the resulting corporation would not realize anything like all of the current combined market share. Maybe a total yeild of 25-27% while still losing money on every vehicle.

This would be final desperation.

Just some thoughtS.

Bunter

Look, it’s a stupid deal. But cash is king – and GM barely has any pawns right now.

Most the products you mention were already in development when Cerberus took over. The rest of them– ENVI, Project D, EV minivan, etc.– are smoke and mirrors.

They ain’t got game.

“In the main, they assembled their hoard by not spending any money on capital expenditure, R&D, engineering or other necessary essentials to carry on as a car company—to the point where the product well is dry.”

You have pretty much described Chrylser under Dumbler. Today? Uh no. Unless the Ram, Journey, Challenger, and minivans were made by waving pixie dust in the air. And let’s not talk about LY, Phoenix, DSG (although Cerberus is really acting stupid on that one), or ENVI. Now we may not know the exact amount of money being spent on these projects due to Cerberus being “private”, but it doesn’t take a rocket scientist to figure out that it is a LOT. This kind of information is not hard to come by (you might want to visit Allpar to start with). And hey, do we really know how much GM is spending on product development or anything else for that matter with their accounting shenanigans? Anyone? Bueller?

“Simply put, it’s not politically feasible to provide loan guarantees to a company owned by private equity.”

True, but how would it look to give taxpayer money to a company (Ford) that is controlled by one family?

John Horner:

“Cerberus could figure out a way to leave Daimler owning the corporate shell and thus the nasty liabilities. Remember, Daimler still owns about 20% of Chrysler.”

Well, the problem there is that Cerberus is trying to get the 20% that Dumbler has. Face it, there is no way, short of C11 or C7 that Cerberus or ANY potential suitor is going to shed the liabilities for retirement etc. As weak and irrelevant as the UAW has become, it still has temendous political clout in DC and the feds are not going to look to kindly at all the those pension obligations being dumped at their doorstep because Cerberus didn’t know what it was getting into in aquiring Chrysler.

Without any hyperbole, this is quite possibly the worst idea in the history of the universe.

Someone over at GMI who seems to have an inside line on the discussions is saying that the ‘rationale’ (I hesitate to imply rationality) is to create a firm that’s Too Big To Fail.

I stand by my assertion.

Well, yeah, but the downside to doing so is that they would then own GM. Not the best use of $11 billion, if you ask me.

The concentration of power in the banking industry has doubled in the past few weeks.

If there is a deal, I would expect it to somehow be structured as a sale of assets. Cerberus would sell certain assets of Chrysler to GM, or trade them for GMAC shares without actually handing over the corporate shell. GM may want to control the active assets of Chrysler, but the last thing they want is the hangover liabilities for Chrysler’s retirees and job bankees. Look for the Federal Retirement Benefits Guarantee Fund to somehow get stuck with much of that. See Industry, Airline.

Cerberus could figure out a way to leave Daimler owning the corporate shell and thus the nasty liabilities. Remember, Daimler still owns about 20% of Chrysler.

If it is truly a merger, GM is going to need a boatload of cash to buyout all of Chrysler’s UAW workforce. White collar workers get shit-canned. Then there will be the dealership lawsuits, etc, etc.

Even GM is not stupid enough to take on all those liabilities simply for the prospect of a government bailout…..or are they???

This whole thing makes absolutely NO sense.

Therefore, as mentioned in Edmund’s Auto Observer, it is more than likely the idea of the brainiacs on Wall Street in order to try to save THEIR bacon. Which is another reason for it not to happen (and the very reason that it is likely TO happen).

http://www.autoobserver.com/2008/10/gm-chrysler-deal-to-save-10-billion—from-where.html

So, let’s play devil’s advocate here. What COULD GM do “with” Chrysler? (Or, vice-versa?) First off, consolodate engineering and design for the US in Auburn Hills and close down the GM HQ (which is up for sale anyhow) as redundant.

Well, they could pare down offerings to the various dealers in a manner last seen in the auto industry in the late 1950’s. (Being a Society of Automotive Historians member, I think in terms of the past a lot).

In the 1950’s, you went to a Chevrolet dealer, and they had several “lines” but really only three basic vehicles; the Chevy line, the Corvette and trucks.

So translated to “now” that could be:

Chevrolet Malibu (including dual mode hybrid version)
Chevrolet Corvette
Chevrolet Silverado (don’t forget dual mode hybrid version)
Chevrolet Volt (yeah, right)

Pontiac G6
Pontiac G8
Pontiac Trans Am (no Camaro)

Saturn Viva (badge engineered Aveo)
Saturn Vibe (moved from Pontiac, new grill)
Saturn Cruze (moved from Chevy, new grill)
Saturn Zafira (small minivan – Brazil sourced?)

Buick Opel Astra (sort of honesty in advertising)
Buick Lucerne

GMC Traverse (moved from Chevy, do dual mode too)
GMC Suburban (do a dual mode hybrid version too)

Cadillac – as is

Dodge Neon (ex-Cobalt – new “happy” face/grill)
Dodge Charger II (ex-Aura moved from Saturn – new grill) – hybrid version also
Dodge Caravan
Dodge Challenger (through 2011)
Dodge Ram (through the end of the Nissan supply contract)(add dual mode hybrid)

Chrysler Valiant (rebadged Nissan Altima)(rental fleet special?)
Chrysler 300 (by 2012, based on Caddy/ reskinned/with GM V6 or V8 Hemi+dual mode hybrid)
Chrysler Town & Country (add dual mode hybrid version)

Jeep Wrangler 2 & 4 door
Jeep Patriot *
Jeep Grand Cherokee – add Two Mode hybrid version

See? Every dealer has a “logical line-up” appropriate to their car division’s make-up in the market. No dealer law-suits.

GMC LLC (GM Chrysler) could own GMAC fully, and Cerberus could own maybe 5% of GMC LLC.

* the Compass is more popular with the ladies, the Patriot with men. Ladies will buy a “guy car” but guys don’t buy “ladies cars” – therefore, leave the one which both will buy…

I think you’re overthinking it, Ken. It would be such a stupid decision on GM’s part.

Uhhh…which is precisely why I think there’s a good chance it may happen.

Okay, now my head hurts.

But, Ken, you are clearly right. This has nothing to do with logic. Is has to do with the “cover” of an election that is weeks away. A lame duck president and administration that is flailing away trying to fix things so its legacy isn’t pure sh*t. And no politician with the guts to stop or even control the bail out madness, now that they’ve already given away, what a trillion dollars in total.

Heck, the $10’s of billions GM-Chrysler would want will seem like chump change. And the Unions, regardless of who is elected, will pounce on the next president and administration to “save the industry.” And the leadership (sic) of this new company will say its “un-American” to not help this new emerging auto power-house.

Madness!

What are they going to do, put Chevy on E-bay? And what happens when word gets out that they wanted to sell it and there were no takers?

Nobody would want these GM brands. Honestly, it really isn’t worth a shot.

Returning to the “too big to fail” issue, the parties that may most want this merger are the banks that are owed money by the existing Chrysler. They don’t want Chrysler to file 11 and wipe out what they’re owed, so they would like to see their obligations pushed over to someone else who might use them to their advantage.