GM – Chrysler "Merger:" A Little Background

Robert Farago
by Robert Farago

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.

Robert Farago
Robert Farago

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  • Br549 Br549 on Oct 11, 2008

    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.

  • Guyincognito Guyincognito on Oct 11, 2008

    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."

  • Strippo Strippo on Oct 12, 2008
    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.