GM Tries to Sell Investors on Chrysler Merger "Synergy"

gm tries to sell investors on chrysler merger synergy

C’mon now, don’t laugh. As The Wall Street Journal points out, this GM – Chrysler deal is some serious shit for people who live and work in and around Detroit. “Analysts estimate more than half of Chrysler’s 66,000 employees would lose their jobs in a merger,” the Journal reports. “Thousands more would be affected at GM and at suppliers and service companies that rely on work with Chrysler.” In a related story, helpfully titled “What If the U.S. Auto Makers Don’t Survive?”, the Journal’s Heidi N. Moore asks “How close are we to an ‘ Omega Man‘ scenario? Lache, who expects that in the event of a serious cash crunch ‘sales among the Big Three will decline virtually overnight,’ provides a nice overview of what would happen to the Big Three-dependent businesses: auto-parts suppliers and retailers including American Axle, Autoliv, BorgWarner, Johnson Controls, Lear, Asbury and AutoNation.” I’ll sum-it up for you: nothing good. And in yet another related story ( in fact the one I set out to blog oh so many control Cs ago), we learn how GM’s pitching the Chrysler hookup in this, the worst all possible times to pitch a major merger…

“In recent days GM, its lenders, and Chrysler owner Cerberus Capital Management, have been trying to woo investors with a pitch about the transaction. That pitch touts a combined GM-Chrysler as delivering cost savings of up to $10 billion, an immediate boost in revenue and an increase in cash available to the merged firm… Those cuts could total as much as 40,000 jobs if a deal comes together, said people briefed on the talks.” Yes, the proverbial person “involved in the deal” maintains that “There is simply the savings that comes with both companies not trying anymore to be all things to all people. There are lots of meaningful cost rationalizations.” OK, now you can laugh. But only sardonically.

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  • Conslaw Conslaw on Oct 21, 2008

    The odds of there actually being $11 billion in the bank after GM & Chrysler merge are about 11 billion to one. If Chrysler really had $11 billion in the bank, why would they be negotiating to be acquired by General Motors, a company with a market cap (total market value) of $3 billion. Plus GM is losing at least $1 billion per month? At best, Chrysler's real non-committed cash is in the $3-5 billion range, and the only reason Chrysler has money is that they have cut back on R&D. Chrysler has virtually nothing in the pipeline to replace the models that are already selling 33% less than they did last year. Let's say Chrysler has 3 billion in cash to devote to the deal. For Chrysler to lay off 30,000 redundant employees and give them the typical $100,000 per employee buyout package, it would take $3,000,000,000 in cash.

  • Geotpf Geotpf on Oct 21, 2008

    Conslaw-That's a good point. If Chrysler really has 11 billion in cash just lying around, and they really want to merge with GM, why don't they just buy up all of GM's stock (at a cost of 3 billion)? Then, they could sell the rest of GMAC to Cerberus itself (selling GMAC to itself, in effect, but taking all of GMAC out of GM-Chrysler and into Cerberus's head office), and then Cerberus could spin off the GM-Chrysler combo (such stock would have to be worth at least the 3 billion they paid for GM initially). This would result in exactly the same result as what appears to be proposed. They don't do this because there is no 11 billion.

  • Kcflyer Guess we know who didn't give enough bribe money (aka campaign contributions) during the latest cycle. Got to pay to play boys and girls.
  • Ima65688420 I'll consider an EV when it can do what my ZR2 diesel can do with similar range and refuel times.
  • SCE to AUX Irony is everywhere:[list][*]The mfrs come to Washington asking for a steak, but get a burger instead. Gov't says "we gave you a meal."[/*][*]The alleged purpose behind EV subsidies is to clean up the air, but domestic content requirements means it's really an American nationalist agenda.[/*][*]Tesla lobbied against more subsidies on philosophical grounds, but got them anyway.[/*][*]Rebates on used EVs will drive up the price of used EVs.[/*][*]EV startups necessarily start with higher models, then work down-market. The new rules shut out Rivian and Lucid just as they are trying to get traction. But maybe - as with Tesla ca. 2018 - they won't lose high-dollar customers over a 'few bucks'.[/*][/list]What a mess.
  • Ajla Much like with CAFE I think the new MSRP limits should be set to a single level instead of $55K for cars and $80K for "trucks".
  • Bullnuke There was an interesting comment from the chief of a fire department made today concerning EV fires. "They're like trick birthday candles. They look like they're out and then they're on fire again.". I haven't noted a special subsidy or funding for the nation's fire departments regarding fire suppression training or equipment to combat "trick birthday candles".