General Motors Death Watch 91 / Ford Death Watch 8: GM and Ford To Merge?

Robert Farago
by Robert Farago

The idea that Ford and GM will merge or, as they say these days, “form an alliance” is yet another sign that we’re reaching the End of Days, Detroit style. Sorry, haven’t you heard? This morning’s Automotive News quotes proverbial “senior executives” and “sources familiar with the talks” as saying GM contacted Ford shortly after GM investor Kirk Kerkorian invited Nissan to crash The General’s going away party. Or was it the other way around? Automotive News is wildly, absurdly, irresponsibly vague on the whole story. Suffice it to say, any merger between America’s Number One and Number Two automakers would kill both of them.

Throughout this Death Watch series, commentators have insisted that a GM bankruptcy defies contemplation. The US economy would be plunged into chaos. OK, with so many foreign-owned automakers plying their domestically-constructed wares, a kind of mini-chaos. But there’s no doubt the knock-on effects of a GM Chapter 11 will be on the major side of major— from tens of thousands of jobs destroyed to millions of GM warranties rendered worthless (ironically enough). Now, imagine if that bankruptcy involved both GM and Ford at the same time. The mind boggles.

Aside from the obvious downside, who in their right mind believes that GM and Ford would benefit from a hook-up (other than some Wall Street Journal fantasists back in July)? The two companies suffer from chronic obesity. As this year’s massive cuts show, both The General and The Blue Oval have too many factories, assembly workers, executives, health care costs, pension costs, brands, models and dealers. At the same time, both carmakers face financial anorexia. They have too few attractive products to generate sufficient operating capital to stay in business—at least in the longer term. In the short term, they’re both failing companies.

With no immediate prospect of relief. If fact, GM and Ford are headed for the massive coronary known as the United Auto Workers (UAW). As it has for the last thirty years, the 800-pound gorilla in the room calls the shots. And it's feeding time at the zoo; their contract is up for “negotiation.” Any merger between the two automakers would require the tacit approval of the unions, who are no more likely to make concessions to a new “Big Red One” than organize Chinese labor.

And what of corporate cultures? Ford is a family firm whose stultifying bureaucracy and deeply entrenched corporate fiefdoms have rendered their business commercially impotent. GM is a confederacy of business school dunces whose stultifying bureaucracy and deeply entrenched corporate fiefdoms have rendered their business commercially impotent. Put them together and what have you got? What’s the opposite of synergy? Overlap, on a scale so epic it makes Ben Hur look like a home movie.

Can you imagine trying to create a single, effective dealer network with a coherent range of products that incorporates both company’s eight brands and [well] over a hundred models? If you think that GM’s product range makes no sense, A) you’re right and B) combining Ford and GM’s products lines would define the word “farrago” for all time. On the dealer level, well, if GM and Ford can’t cut down/amalgamate their retail “partners” as they are, what are the chances the two of them could do it together? Would it even be legal?

Perhaps the most bizarre part of this bizarre unsubstantiated rumor is the fact that anyone gives it credence. The mere existence of this merger idea in the intellectual space normally reserved for turnaround talk and BM’s (Bold Moves) indicates just how desperate things have become. If Wall Street reacts positively to this non-news, you’ll know that the world has gone insane. Of course, they’re been reacting to GM’s obfuscation and Ford’s Jump Down Turnaround (pick a bail of debt) with good cheer, ignoring the broken business basics that are dragging– have been dragging– both companies into oblivion. So, I suppose anything is possible.

But not desirable. Yes, a GM / Ford merger would “reinvent” the American automotive scene, creating a behemoth that we haven’t seen since, um, GM was healthy. But its success would depend entirely on wholesale slaughter— something neither company has been able to achieve on its own. And that’s because the only way they could affect the requisite root-and-branch change is… bankruptcy. You first? No, after you. No after you. I know; let’s go together! No, after you. No, after you.

Robert Farago
Robert Farago

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  • Ttilley Ttilley on Sep 20, 2006

    JustAnotherGMer wrote: "If anything, the proper metaphor is not that Toyota “took on” an 800 lb. gorilla. More like they snuck into the zoo and took some of the gorilla’s food while he was sleeping. Gorilla hungry! Gorilla mad! Why zookeeper let them take my food?!?!" I regularly backpack in bear country. I can't imagine a bear "sleeping" while there's food about. Nor can I imagine a wild bear whining about a zookeeper. What's the "gorilla"'s explanation? Tom.

  • Glenn Glenn on Sep 20, 2006

    With Daimler-Chrysler's $1.5 BILLION deficit for the 3rd quarter of 2006, maybe we should be seeing a DCX Death Watch 1 soon, and start contemplating whether it would be absolute suicide for GM, Ford and DCX to simply merge. Wow. What a train wreck that would be! Kind of like the equivalent of merging the disasterously miserable and awful nations of Cuba, Iran and North Korea. Like, that would work, right?

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