American Leyland Birth Watch 4: Delivered From Bondage?

Edward Niedermeyer
by Edward Niedermeyer

The merge-and-nationalize “solution” favored by those who don’t know their history has a new lease on life, reports the Financial Post. And the new champions are none other than GM’s bondholders, who continue to negotiate an equity restructuring. The logic goes that since bondholders are being asked to swap their debt for equity, a larger merged firm would make for a safer investment. And the idea might just be crazy enough for the government to buy in too. “From the government’s perspective, a GM-Chrysler combination offers the appeal of collapsing two problems into one and achieving necessary consolidation,” reckons Citigroup analyst Itay Michaeli. “But it would likely also entail additional government funding.” Just $4B-$6B extra though, and worse job loss. No biggie. But, argues Michaeli, “if a true buy-in exists that [a merger can generate US$6 billion to US$8 billion] in annual EBITDA synergies . . . we would think that the GM bondholder committee would attempt to condition the [debt-for-equity] exchange on M&A, since the upside would essentially accrete to them.” Of course that’s an “if” of epic proportions.

Edward Niedermeyer
Edward Niedermeyer

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  • HerrKaLeun HerrKaLeun on Feb 25, 2009

    the whole bailout is supposed to safe workplaces. however, any more efficiency, mergers etc. only can come with layoffs, dealer closing etc. So either way there will be people unemployed. so the bailout doesn't accomplish anything. In addition, even if it would save the big 2.2, it then would destroy workplaces with the transplants because every (Mexican built) GM that is sold, destroys one (US built) Toyota. A merger of two bad companies that suffer from bad products and too many overlap and too many brands really sounds good. then GM not only has 10 different sedans (that all are the same except for the badge and name), then it will have 13 cars competing for the very some costumer. I'm not a merger expert, apparently premium-RWD (Mercedes) and crappy-FWD (Chrysler) didn't work out because there was no synergy to gain. However, in a world of overcapacity a merger between to crappy-FWD companies doesn't seem to be good either.

  • HarveyBirdman HarveyBirdman on Feb 25, 2009

    Let my taxpayers go!

  • Guyincognito Guyincognito on Feb 25, 2009

    "From the government’s perspective, a GM-Chrysler combination offers the appeal of collapsing two problems into one" I think this sort of thinking is entirely too short sighted. How about we combine the banking crisis, the automotive crisis, the housing crisis, and the wars in Iraq and Afghanistan with breast cancer, autism, poverty in Africa, and Knight Rider and tackle them all with one decision? Thats the kind of "vision thing" we need right now.

  • Kurt. Kurt. on Feb 26, 2009

    OK, I've backed into a corner, I got my guard up to protect my face and crotch...I think they should combine GM and Chryco. [ouch, uggg, doh, didn't see that coming] -First and foremost, it would piss off the UAW. -The govt would only be giving [s]a bonus[/s] a loan to one company. [s]50%[/s] [s]Higher[/s] Maybe a change to get paid back. -Might finally force GM into C11.

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