The Wall Street Journal had a look at the idea of a GM – Chrysler merger. They say “Central to the plan is private-equity firm Cerberus, which owns 80.1% of Chrysler and 51% of GMAC, an 89-year-old auto lender that has been seriously weakened by its moves into mortgage banking. Cerberus proposed a swap in which GM would acquire Chrysler’s automotive operations, and in turn give Cerberus its remaining 49% stake in GMAC, these people said.” This is true. BUT it occurred well over a year ago, when Cerberus was hot to merge Chrysler Finco with GMAC. (In fact, when Cerberus bought Chrysler, TTAC suggested that this play was the reason for the purchase.) GM said no. We can now reveal that later, when excrement and air movement device collided, Cerberus proposed the exact opposite deal: selling their share of GMAC back to GM. That also went nowhere. Today, both Chrysler and GM– and Chrysler Finance and GMAC– are dead companies walking. So deal or no deal? No deal.
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Cerberus offering to sell its half of GMAC back to GM? I’d love to have been in the conference room to hear that presentation.
If it made any sense to buy Chrysler, then Renault or VW would have already done so. Both want a larger presence in North America. I’ve been assuming that both have been playing chicken with Cerberus. The longer they wait, the worse off Chrysler gets, but also the lower the selling price gets.
There’s also of course the risk that someone will jump in first. It’s in Cerberus’ interest to talk with GM if only because this might scare Renault or VW into acting.
There is very little reason for GM to acquire Chrysler, unless it’s buried in the details of corporate taxes or government bailouts.
Don’t think Studebaker-Packard.
Think American Leyland.
Barack H O, San Fran Nan, Dingy Harry, and Ron Gettelfinger.
The GM – Chrysler merger is a perfect analogy to two swimmers who were drowning that somehow made their way to each other only to fight each other to stay above the water and drown faster than they would have if they tried to survive on their own.
I agree… a Chrysler purchase makes little or no sense for GM- a company that already has more brands than it can handle. It’s possible GM could acquire Chrysler, keep Jeep and shut down Chrysler’s automaking operations.
But would acquiring Jeep be a net gain in the current environment? Possibly, but I can’t help but think that Jeep has already seen its best days for a while.
I keep imagining that Renault/Nissan or VW will eventually get Chrysler – assuming an Indian or Chinese company doesn’t step in if the Europeans hold out just a bit too long.
Either way, any potential deal with GM would have to involve no cash.
But wait it gets even weirder:
G.M. Held Merger Talks With Ford Before Chrysler by Bill Vlasic in the NYTimes on October 11, 2008.
American Leyland here we come.
How about if, immediately following the swap, GM files C-11, reopens the labor agreement, and eliminates jobs preservation language. That way, it nixes a competitor (such as it is) an albatross (GMAC) and an unrealistic UAW contract while gaining a world class minivan and a still-valuable Jeep brand. I could envision this working decidedly in GM’s favor.
WTF? I feel like I woke up in bizzaro world, well more than usual anyway. How could anyone seriously consider a GM, Chrysler merger? Its an act so stupid it needs no analogy. In fact, should it happen, it would become an analogy of its own. “Oh, I knew Sherry and John wouldn’t work out, they were like GM and Chrysler.”
The GM – Chrysler merger is a perfect analogy to two swimmers who were drowning that somehow made their way to each other only to fight each other to stay above the water and drown faster than they would have if they tried to survive on their own.
In an objectivist utopia you would be right. But if GM is “arguably” too big to allow to fail, then merging GM and Chrysler only improves that argument. A sweet bailout or painful BK filing of some sort is a certainty for GM now, period. Under such circumstances increasing its footprint as much as possible is a rational strategy. After all, there are plenty of helpless little people on shore chained to GM and/or Chrysler, so if they drown together, thousands if not millions will drown with them. The scarier GM can make that scenario, the better – for GM, that is.