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NINETY EIGHT REGENCY

GM to buy Chrysler? Not Likely

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Motor Trend: www.motortrend.com

Posted 2/14/2007 3:24:54 PM by Angus MacKenzie

The blogosphere has erupted over reports in a German business magazine that GM was talking to DaimlerChrysler about buying the troubled Chrysler Group. The magazine cited company sources as saying the talks were in full swing, but still at an early stage.

GM and DCX might indeed be talking (these days automakers talk a lot about things like components sharing, such as the deal Ford and GM did to develop six speed automatic transmissions together). But it’s almost certain the last thing they’re talking about is a Chrysler deal.

Buying Chrysler makes absolutely no sense for GM. Here’s why:

1) Product overlap. GM already builds vehicles that compete in every segment that Chrysler’s in (and a few more besides). Buying Chrysler would bring no new market niches to GM.

2) Capacity. The last thing GM needs is more manufacturing capacity in North America. Indeed the challenge for both companies is to “right size” their businesses to match the reality of a globalized North American market. GM needs a smaller manufacturing operation here, not a bigger one.

3) Market reach. Chrysler brands have a minute presence in markets outside North America compared with GM brands, and would only require further investment to grow. There’s not point in doing that just to compete with yourself (see #1).

4) Legacy costs. The cost of healthcare, pensions, etc. for its U.S. workforce is already GM’s biggest business cost. Buying Chrysler would only add to the problem. And because the UAW is also heavily represented at Chrysler, there’s no way of leveraging the two workforces to reduce costs.

5) Complexity. GM is showing signs that focusing on the basics and making the most of its global resources is a smart strategy. Trying to buy and integrate a company the size of Chrysler would be a fatal distraction for the senior management team.

6) Cost. Potential cost savings and synergies from things like platform sharing will excite the analysts on Wall Street, but in reality, it’s a red herring. Done right, GM could save some bucks, but with the long lead times and different product cycles it would be 10 to 15 years before any real benefits might show. GM, in recovery, can’t afford the time.

Bottom line: There’s no upside in Chrysler for GM. At any price.

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There's no way that would happen. To take on a lot of extra baggage? It'd never be justified... it'd take GM further downstream before they started swinging upwards.

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Layofffs are already going through as are talks and negotiations. The biggest issue according to most is the labor so if that was to fall in line whats the difference in aligning a few extra factories and platforms. Looking at the steps already taken and the success that Goodyear had in a similar situation it isnt too far fetched.

Personally, dont see it happening but what if. If anything its more of a partnership like GM has with so many others that is being investigated. Who knows? Maybe someone else is more interested. Hope the man in the giant sombrero is taking a siesta.

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It would be interesting to consider the idea of GM buying the Chrysler part of DCX and then dumping the union out of the Chrysler plants. Once the ownership of the company changes they'd be able to do it. Then GM would have an opportunity to gain ground on Toy-toy by lowering their overall labor obligation. At least GM would be adding a huge amount of factory capacity to their portfolio if nothing else happened.

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It would be interesting to consider the idea of GM buying the Chrysler part of DCX and then dumping the union out of the Chrysler plants. Once the ownership of the company changes they'd be able to do it. Then GM would have an opportunity to gain ground on Toy-toy by lowering their overall labor obligation. At least GM would be adding a huge amount of factory capacity to their portfolio if nothing else happened.

It doesn't work that way. You can't dump the union just because the ownership has changed.

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Guest YellowJacket894

There's no way that would happen. To take on a lot of extra baggage? It'd never be justified... it'd take GM further downstream before they started swinging upwards.

:withstupid:

A GM/DCX merger is the last thing that needs to take place.

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It doesn't work that way. You can't dump the union just because the ownership has changed.

I suppose that's true. How about this? Let DCX split off the Chysler group, which will subsequently lead to bankrupcy, and THEN they can dump the union at which point GM can buy what's left.

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I suppose that's true. How about this? Let DCX split off the Chysler group, which will subsequently lead to bankrupcy, and THEN they can dump the union at which point GM can buy what's left.

:nono:

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I don't think that this country can afford to have any of it's automaker to end up in bankruptcy.

Chrysler was there once already and survived.

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Chrysler was there once already and survived.

Chrysler never declared bankruptcy. And the Japanese brands weren't nearly as strong as they now are when Chrysler was bailed out.

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Iacocca got the US to "co-sign" for a loan, not 'bail out'. And it got paid back.

But, now, they would have difficulty being independant. The cheap interiors for one are driving buyers away, and they can't make $$ with rebated cars and only the 300 series.

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I just want them to buy Jeep and merge it into the Hummer line.

I second only if they keep the Compass, 4 door wrangler and Liberty. Man do the real Jeep people hate those.

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