Wild Ass Rumor of the Day: Ford and Chrysler to Merge
Yeah, right. That makes perfect sense; for all the common sense reasons you're about to post below. And yet, Fortune's senior editor Alex Taylor Three Sticks offers the possibility within his '08 auto industry preview. "Speculation is building about Cerberus' exit strategy from Chrysler, as well as its timing. Will it try to merge Chrysler with Ford or sell it to another automaker, or go to the public with an IPO?" At least Taylor's on board with TTAC's Chrysler Suicide Watch theme: "Crosstown rivals are watching carefully because a Chrysler in distress could lead to suicidal industry-wide price-cutting." Wow, all three Motown automakers could be jumpers? Now that we didn't consider. While he's at it, Taylor allows himself some xenophobic posthumous projection regarding India's Tata motors assuming control of Jaguar. "Winston Churchill must be spinning in his grave." And speaking of theoretical quotes… "The other day, a GM executive was speculating that the auto industry was sorting itself into two categories: two super-companies, GM and Toyota, with annual production of nine million vehicles each, and all the rest." Alex torches his straw man and concludes "the world is becoming a fluid place." This is news?
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Ford and Cry-sler. One POS pulling another,
Yes, it makes perfect sense for a red ink bleeding, SUV heavy, small car needin', over-dealered car maker to merge with the exact same type of company!
A fleet-only manufacturer would work, I think, for Cerberus. They can sell Jeep off for a fortune, then buy Ford's St. Thomas assembly plant, and Chrysler can build the Crown Vic/Grand Marquis/Town Car, plus all the Chrysler fleet vehicles (Charger, Sebring, etc.) It is sufficiently small enough for Cerberus to not care much about, and there's a guaranteed market, which is something Chrysler doesn't have right now. Plus, Chrysler would then dominate the police, taxi and livery market.
The fleet only idea will not work. Expensive ongoing engineering is going to be required to meet market demands as well as regulatory emissions and safety standards. Those costs need to be spread over a large enough customer base, and fleets don't do it. Even a fleet dedicated company isn't going to get 100% market share of fleet business when other makers will be motivated to sell a certain number of units at prices just over incremental production costs in order to load balance, etc. The only fleet only kind of vehicle I can think of in the market worldwide is the custom built London Taxi, which is an anomaly in the cab market. The last US company which had a long go in that business was Checker. They died off when the modern regulation on emissions and safety got under way seriously in the 70s and 80s. Checker was not able to generate sufficient cash to reinvest in the business. The Marathon cab continued in production for over 30 years, but the tooling was worn out and the money to bring the car into the modern era wasn't there. End of the line.