Oracle of Delphi

GM and Chrysler are in Merger talks!

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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 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.

link: http://www.nytimes.com/2008/10/11/business/11auto.html?hp

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Just what GM needs:

More brands.

More dealers.

More red ink.

Great move by Cerberus, terrible move by GM.

They kicked Nissan/Renault to the curb for this move?

It's got to be a ploy by Cerberus to get Ghosn to step up and buy Chrysler, as there's absolutely no business reason in the world for GM to do this.

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G.M. and Chrysler Explore Merger

By BILL VLASIC and ANDREW ROSS SORKIN

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.

http://www.nytimes.com/2008/10/11/business...amp;oref=slogin

Come Watson the game is afoot. Could it work? Enquiring minds might like to savage this topic.

Sweet side-deals with Nissan and others could come of this.

Edited by longtooth
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Just what GM needs:

More brands.

More dealers.

More red ink.

Great move by Cerberus, terrible move by GM.

They kicked Nissan/Renault to the curb for this move?

It's got to be a ploy by Cerberus to get Ghosn to step up and buy Chrysler, as there's absolutely no business reason in the world for GM to do this.

Give it a chance enzl. There are worse alternatives.

Edited by Pontiac Custom-S
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Cash? Would size matter? GM's been reducing themselves 'nicely' for some time now.

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Cash? Would size matter? GM's been reducing themselves 'nicely' for some time now.

What would you say if there were discussions to spin off GME, GMDAT and GM Holden? Or to close GMNA down altogether?

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What would you say if there were discussions to spin off GME, GMDAT and GM Holden? Or to close GMNA down altogether?

It wouldn't surprise me. Even as it'd likely put me out to pasture ungraciously.

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I don't like the sound of any of this.

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I like the fact that I will now be able to to buy a Jeep with my employee discount, but it's a hell of a way to get a new minivan.

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>>"There could be antitrust questions raised..."<<

With only 37% of the market ?? Business that slow at the DoJ ??

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Well, I can tell you this: if GM merges with Chrysler, the Europeans will once again screw the Chrysler side of things over. At least Mercedes helped Chrysler with rear-drive cars, the first thing that GME will do is take the 300/Charger/Challenger right off the market and replace them with front-drive compact cars.

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jeep is the best brand...hemi is the best tech... isn't the rest fluff? rape and pillage? no, i would only care if it happened not as the last resort.

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wouldnt this be like

Rms_titanic.jpg

taking on passengers from

Hindenburg_at_lakehurst.jpg

No its more like

This...

death-star.jpg

Taking on passengers from...

Rms_titanic.jpg

Edited by Teh Ricer Civic!
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Oh c'mon, elaborate.

GM has a deep enough hole to dig out of by itself...they don't need any more extra baggage with Chrysler.

GM-Chrysler = Chevrolet, Dodge, Pontiac, Saturn, Chrysler, Buick, Cadillac, GMC, Jeep, Saab, Opel, Holden, Vauxhall. That is one big mess. It will only give GM another excuse to kill off or neuter more brands. Say goodbye to Pontiac and GMC, and maybe Dodge or Chrysler if this happens.

Merging GM and Chrysler will further dilute what makes each company unique.

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What would you say if there were discussions to spin off GME, GMDAT and GM Holden? Or to close GMNA down altogether?

I would say, as with 90% of your self-affirming, subtle I'm-better-than-you posts, its so full of &#036;h&#33; that I can smell it through my cable modem.

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GM has a deep enough hole to dig out of by itself...they don't need any more extra baggage with Chrysler.

GM-Chrysler = Chevrolet, Dodge, Pontiac, Saturn, Chrysler, Buick, Cadillac, GMC, Jeep, Saab, Opel, Holden, Vauxhall. That is one big mess. It will only give GM another excuse to kill off or neuter more brands. Say goodbye to Pontiac and GMC, and maybe Dodge or Chrysler if this happens.

Merging GM and Chrysler will further dilute what makes each company unique.

It'd be piece-mealed anyway in the largest garage sale in this hemisphere if nothing's done. A reconstituted GM/Chrysler would have Trucks, Luxury, Bread & Butter vehicles. Access to funding. It'd whittle the UAW down to near insignificance. Even beyond where they exist in a 'Pleasantville'-type limbo now. Old coots such as myself would retire and meet for lunch and tell stories and enjoy our status as anachronisms all the more. Happy to have been there and pleased to be out.

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And that calls for some photoshopping.

gmchrystarwa9.jpg

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GM should just treat Chrysler like Daewoo... wait for Chrysler to fall apart (if it actually happens) and then buy the pieces it wants. Either that or just let Nissan/Renault deal with it (which is what I think will happen.)

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