Possible GM/Chrysler merger?

[S204STi]

G.M. and Chrysler Explore Merger

By BILL VLASIC
Published: October 10, 2008
DETROIT ? General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.

The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were ?50-50? as of Friday and would most likely still take weeks to work out.

A merger would be a historic event, with two of the most iconic names in American industry coming together to survive in an increasingly difficult environment. Both have roots dating back decades in Detroit and, with Ford, long dominated the auto industry ? until Japanese and other foreign car makers began making inroads into the American market.

The auto industry is being pummeled from all sides ? by high gas prices that have soured consumers on profitable S.U.V.?s, by a softening economy that has scared shoppers away from showrooms, and by tight credit that is making it difficult for willing buyers to obtain loans. Both G.M. and Chrysler have been struggling with product lineups that are out of sync with consumer demand for smaller, more fuel-efficient cars.

General Motors? stock has fallen from more than $42 a share last year to less than $5, and it is burning through its cash hoard at a rapid rate. Chrysler, as a private company, no longer needs to report its finances.

The meetings between General Motors and Cerberus began more than a month ago, said people familiar with the discussions, and the companies have held several talks involving their most senior executives. Given that both G.M. and Chrysler are struggling, the two sides may determine a merger may not be in their best interests.

The exploratory talks have included debates over various calculations of the savings that would result from a merger, these people said, but neither side has yet to dig into each others? private financial books and records.

At the same time, Cerberus is continuing to hold talks with other automakers including Nissan and Renault, said people familiar with the discussions. It is unclear at what stage those discussions have reached.

Speculation about a possible bankruptcy filing by G.M. has mounted in recent weeks because of the automaker?s dwindling cash reserves. The automaker had $21 billion in cash on hand at the end of the second quarter, but it was burning through more than $1 billion a month.

The credit rating firm Standard & Poor?s put G.M. on negative credit watch on Thursday.

But G.M. has said it is confident that it can increase its liquidity, and emphasized in a statement released Thursday that it was not considering a bankruptcy filing.

G.M. once commanded about 50 percent of market, but its share so far this year has fallen to 22 percent, according to the research firm Autodata. Chrysler had a market share of about 15 percent before acquisition in 1998 by Daimler, but its share this year has dwindled to 11 percent.

How government and labor react to a potential merger of G.M. and Chrysler is unclear. There could be antitrust questions raised, but political issues could be overshadowed by the precarious financial prospects of both automakers.

If G.M., the nation?s largest automaker, combined operations with Chrysler, the smallest of Detroit?s Big Three, they would create an auto giant that would surpass Japan?s Toyota Motor Company, which recently has been battling G.M. for bragging rights as the world?s largest automaker.

A G.M. spokesman declined to comment on any specific talks with Chrysler. ?Without referencing this specific rumor, as we?ve often said G.M. officials routinely discuss issues of mutual interest with other automakers,? said the spokesman, Tony Cervone. There was no immediate comment from Cerberus.

People briefed on the deal said the talks started as an exploration of possible joint venture opportunities between G.M. and Chrysler.

Cerberus acquired an 80.1 percent stake in Chrysler in August 2007 for $7.4 billion from the German automaker Daimler AG.

Under the terms of the deal being discussed, Cerberus would end up owning an unspecified equity stake in G.M.-Chrysler, according to people briefed on the talks.

The ramifications of the merger would be enormous in the global auto industry. G.M. and Chrysler together would control more than 35 percent of the United States vehicle market, and be by far the dominant producer of pickup trucks, sport utility vehicles and minivans.

It would also marry such iconic American brands as G.M.?s Chevrolet and Cadillac with Chrysler?s Jeep and Dodge divisions.

However, the potential merger carries enormous risks. Both G.M. and Chrysler are struggling mightily in what is the worst market for vehicle sales in the United States in 15 years.

People close to the discussions said that if the prospective deal did not happen, Cerberus would probably look to Nissan and Renault.

But the marriage of G.M. and Chrysler has far more potential than hitching Chrysler to a foreign automaker. While G.M. and Chrysler may be hamstrung by labor contracts from cutting jobs, the two companies could combine dealers, product lines and advanced vehicle technology.

Bill Vlasic reported from Detroit and Andrew Ross Sorkin from New York.

[the Teuton]

Here's my idea:

-Sell of Viper to Saleen's new company
-keep Dodge as a minivan/truck company
-Get rid of Hummer/Integrate it with Hummer a la Land Rover/Range Rover
-Chrysler to become the fleet division for the whole company
-Bring back AMC
-Kill off...something less profitable.

I dunno, I think it's a bad deal.

[S204STi]

I guess I should start training on Chrysler products.

[the Teuton]

What's wrong with making companies stronger as a single unit rather than making them bigger.  Why is the American mentality always bigger = better?

Saab should be low volume and quirky.
Pontiac should be a sports division right under the Corvette and the Camaro.  Yet, they're killing off the Solstice.
Chevy should be budget-minded with the exception of the Camaro and the Vette.  Yet, they, too, have a $40,000 Lambda.  It's retarded.
Saturn should be economical and Euro-centric.  Yet they, too, have to have the same cars as everyone else.  An Astra VXR here would do wonders for the company.  The Vue is a nice vehicle, too, but it's not worth the mid-20s asking price.  The Aura's back seat is terrible, and they didn't market the cars correctly -- none of them.
Buick -- I like Buick's current direction.  They should be the new Oldsmobile.  I still wish they had a convertible/cruiser like the Solara.
Caddy -- They're kinda cool, too.  Big and brash is the only way they will succeed in this market.  The CTS should be moved to cheaper 5er levels in size and quality, an AWD BLS should come standard here as a 3er fighter, and the STS should be made into a large upper sedan.  The DTS should still be the volume leader but with AWD and a 6-speed auto.

GM doesn't know how to focus the brands.  Maybe they need to hire Ferdinand Piech or Carlos Ghosn.

[TBR]

"Pontiac should be a sports division right under the Corvette and the Camaro.  Yet, they're killing off the Solstice."

They have to make money.

[the Teuton]

"Pontiac should be a sports division right under the Corvette and the Camaro.  Yet, they're killing off the Solstice."

They have to make money.

BMW is a sporty car maker.  Second to Porsche, it makes the most money per car in the entire industry.  If they can't do their mission successfully, kill them off.

[Raza]

Let them both die.

[Soup DeVille]

I guess I should start training on Chrysler products.

All I know is every body man I've ever met hates them.

[TBR]

BMW is a sporty car maker.  Second to Porsche, it makes the most money per car in the entire industry.  If they can't do their mission successfully, kill them off.

They can't make money on the Solstice without pricing it in Vette territory. How would that make sense?

Also, BMW and Porsche make so much money more because of their reputation for making certain kinds of cars than because they actually make those kinds of cars.

[the Teuton]

They can't make money on the Solstice without pricing it in Vette territory. How would that make sense?

Also, BMW and Porsche make so much money more because of their reputation for making certain kinds of cars than because they actually make those kinds of cars.

And they can sell a $90k 5er based on a car that starts at $40k.

Economies of scale can be your friend.  Apparently, GM execs never took economics courses in college.

[TBR]

How many Kappas do you think they can sell? Hint, not that many.

They would have to make major changes for the Solstice/Sky to be economically viable.

[Raza]

And they can sell a $90k 5er based on a car that starts at $40k.

Economies of scale can be your friend.  Apparently, GM execs never took economics courses in college.

Do they have a class called "Making Cars That Don't Suck"?

[Raza]

How many Kappas do you think they can sell? Hint, not that many.

They would have to make major changes for the Solstice/Sky to be economically viable.

10.  Maybe 12.

[the Teuton]

How many Kappas do you think they can sell? Hint, not that many.

They would have to make major changes for the Solstice/Sky to be economically viable.

Somehow Mazda made it happen.  BMW made it happen to an extent with the Z3, and Toyota still turned a profit on the MR2, I think.

Why not make a larger Kappa for Buick/Cadillac?

[TBR]

Somehow Mazda made it happen.  BMW made it happen to an extent with the Z3, and Toyota still turned a profit on the MR2, I think.

Why not make a larger Kappa for Buick/Cadillac?

Read the second line of my post

They could do it, but right now it is far more important that they focus on increasing small and midsize car sales. Once they accomplish that, then maybe they can focus on fun cars.

[the Teuton]

Read the second line of my post

They could do it, but right now it is far more important that they focus on increasing small and midsize car sales. Once they accomplish that, then maybe they can focus on fun cars.

You make too much sense, Mr. Toyoda.

[TBR]

It's a business, making money is their number one priority.

[the Teuton]

It's a business, making money is their number one priority.

Thank you, Mr. Toyoda.  Would you like some sake with your meal?

[ifcar]

http://money.cnn.com/2008/10/11/news/companies/bc.apfn.gm.chrysler.merger.ap/index.htm?cnn=yes

DETROIT (AP) -- General Motors Corp. and Chrysler LLC have held preliminary talks about a merger or an acquisition of Chrysler by GM, according to published reports Saturday.

The Wall Street Journal, citing people it described as familiar with the discussions, said Cerberus Capital Management, the private equity firm that owns 80.1% of Chrysler and 51% of GMAC Financial Services, proposed trading Chrysler's automotive operations to GM. The Journal said Cerberus would receive GM's remaining 49% stake in GMAC.

The New York Times, also citing people familiar with the talks, said the automakers were discussing a merger. The Times did not mention GMAC, a traditional auto lender hit hard by the housing market downturn.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize because both GM and Cerberus want to quickly divest the assets under discussion.

The negotiations between 100-year-old GM and 83-year-old Chrysler began more than a month ago, according to the Times. Its sources said the chances of a merger were "50-50" as of Friday and likely would take weeks to complete.

Both newspapers posted their stories on their Web sites late Friday.

"Without referencing this specific rumor, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers," GM spokesman Tony Cervone said.

"The company is looking at a number of potential global partnerships as it explores growth opportunities around the world," Chrysler spokeswoman Lori McTavish said. "Beyond those partnerships already announced however, Chrysler has not formed any new agreements and has no further announcements to make at this time."

GM (GM, Fortune 500) shares closed Friday at $4.89, up 13 cents, or 2.7%. On Thursday, they closed at $4.76, the lowest level since 1950.

GM said Friday, in response to the stock price, that it is nor considering a bankruptcy filing.

"Clearly we face unprecedented challenges related to uncertainties in the financial markets globally and weakening economic fundamentals in many key markets, but bankruptcy protection is not an option GM is considering," a company statement said.

First Published: October 11, 2008: 6:13 AM ET

[Galaxy]

And Chrysler can offer GM what?

The Wrangler and the Minivans is all I can think of.

[ifcar]

And Chrysler can offer GM what?

The Wrangler and the Minivans is all I can think of.

If Chrysler's EV concepts it showed recently are any good, that would be a good supplement to the Volt.

[Galaxy]

If Chrysler's EV concepts it showed recently are any good, that would be a good supplement to the Volt.

Two totally different systems with virtually no synergies. 

[ifcar]

Two totally different systems with virtually no synergies. 

Why wouldn't it be in GM's interest to have those two different systems?

[Onslaught]

We just bailed GM out. How can they buy anything?

[Galaxy]

Why wouldn't it be in GM's interest to have those two different systems?

They should at least see that they share components like inverters etc. Designing it for that costs money.

[ifcar]

We just bailed GM out. How can they buy anything?

Trading GMAC to Cerberus for Chrysler without money changing hands.

[2o6]

Two totally different systems with virtually no synergies. 

Except for the battery technology, the systems are quite similar.

[2o6]

BMW is a sporty car maker.  Second to Porsche, it makes the most money per car in the entire industry.  If they can't do their mission successfully, kill them off.

People are buying Pontiacs even with their "Faux-Sporty" image. I've always thought Pontiac to be the furtest distanced from Chevy as far as interior and exterior styling.

[GoCougs]

Both are headed for ruin, both have essentially the same product mix, so what's the advantage?

Perhaps getting GM privatized (a la Cerberus) is the goal...

[Galaxy]

Except for the battery technology, the systems are quite similar.

The Mercedes E class and the BMW 5er are also quite similar but with zero synergies.