The autoblogosphere’s self-styled Autoextremist normally posts every Wednesday. So you know things are OOC when Peter DeLorenzo feels compelled to unleash his weekly rant on a Monday. A good thing too; Sweet Pete knocks one out of the park. “Let me get this straight right off the bat,” DeLorenzo writes late in the fifth inning. “The reality of a merger between GM and Chrysler would be an unmitigated disaster of incalculable proportion, one that would decimate both companies… When you have one company that has too many models, too many divisions and too many dealers, how could you possibly think that combining that company with another company that has too many models, too many divisions and too many dealers would be a good idea?” Beats me. Having dispensed with that little piece of business, DeLorenzo is ready to predict ChryCo’s T.O.D. “With Cerberus being ‘done’ with Chrysler, the fate of the auto company based in Auburn Hills has been set. Within six months, Chrysler will be taken over or ‘parted out.’ Either way, Chrysler will cease to exist as we know it by next spring, if not sooner.” From there, it’s GM’s turn…
“As hard as it may be to believe, GM may be next up behind Chrysler to face elimination, consolidation or ruination. The first 100 years for GM blew by in a blur. The next twelve months, on the other hand, are shaping up to be an excruciatingly painful siege that could determine the very existence of the company.” Welcome to the Realist’s Club, Pete– although I get the idea that DeLorenzo would like nothing better than to backtrack on this gloomy scenario, if someone should rid GM of that troublesome man (CEO Rick Wagoner).
Would there be any advantages to a merger?
I have personally been through three mergers in two different industries. My experience leads me to believe that mergers are a way to (eventually) cut costs and cut loose the chaff from both sides.
Or is there entirely too much UAW and/or corporate culture to cut through?
This is DeLorenzo’s best editorial in quite some time. Excellent piece, even if the timing is a few weeks off.
My favorite quote: “When you have one company that has too many models, too many divisions and too many dealers, how could you possibly think that combining that company with another company that has too many models, too many divisions and too many dealers would be a good idea”
Spot on. I don’t always agree with DeLorenzo, but I think his views on a GM-Chrysler merger are right. Also, the analysis of why (in God’s name) GM would even want Chrysler boils down to the Jeep brand and (rumored) cash reserves.
A GM-Chrysler hookup would be a failure of epic proportions.
Hmmm, Chrysler to be parted out and Ford as the likely last man standing, if only by default of the other two entrants in the race. It all sounds so familiar!
The suits love the kind of merge and purge scenario because it gives so many opportunities for a night of the long knives. All those idiots know is “cost cutting”. Wagoner, Lutz and the rest of the ego maniacs at GM wouldn’t even recognize good long term strategic planning and implementation. They are highly trained monkeys doing the only things they know how to do, which still leaves them as idiots. Technology changes, but human nature does not. The Wagoner’s of today are no different in character or behavior from the conniving minor lords and ladies scheming and nattering at the king’s table in the days of old. What intellect they have is focused on short term personal advantage without any thought for the greater good. Is this the best our high priced Harvard MBAs can muster? Well dressed gamblers on Wall Street and slick corporate politicians in the boardrooms?
P.S. The closing of Peter’s piece is interesting: “Instead, GM has already moved on to renewed, serious discussions with Carlos Ghosn about the possibility of merging GM’s global operations with Renault-Nissan.” Paging Mr. York, paging Mr. York.
Everyone would like to back track on the current gloomy scenario, but it is what it is and the 2009 model year will probably be worse than 2008.
How could a management team unable to properly manage 8 brands in this country, plus Daewoo, Holden, Opel and Vauxhall overseas, even contemplate acquiring 3 more?
The only rational reason I can come up with is that GMAC must be losing money hand over fist and GM doesn’t have the cash to shore their end of it up.
It would be better to let the dogs at Cerberus pony up the capital that GMAC needs, for an increased stake and let them choke on their foray into vehicle manufacturing.
By the way, the above comments are pure speculation on my part. My crystal ball stopped working much earlier in the year.
Whoa whoa. There was rumblings that Ghosn will have to give up on either Nissan or Renault (I think it was Renault) and now there are rumblings that GM-Nissan-Renault (and possibly Chrysler) might now tie up?
Jesus. How bad is that idea?
And I gotta say, I like Ford’s thanks, but no thanks approach. If they can pull it off, I think they’ll end up in a much better position.
Not only are there too many models…but one point of a merger is to pick up market share that you cannot on your own.
Product-wise it makes no sense. I cannot think of another company (not even Ford, though they are close) that has a greater overlap with GM’s products than Chrysler does.
Market-wise it makes no sense. Chrysler and GM have roughly the same type of customer (traditional American buyers).
I mention those in a relative light…compare a merger with Chrysler to what GM could get if it picked up practically anyone else. Just try to name a more similar company they could merge with!
GM is so bloated. They could have started saving tons of money 15+ years ago ( or more ). They’ve always had way to many layers of management. All of these auto companies are this way ( unfortunately I’ve chosen to spend most of my professional career in the automotive industry ). They’ve always kept managers around and useless departments and cut money in engineering and new product development. I’ve seen hundreds of engineers lose their jobs and some really cool product development ceased, while HR personnel and the training department ( think of the type of training you see Michael give on “The Office” – I’m not kidding ) still continue to exist. It’s sad to see, because they could all be doing some great things with automobiles, but it will never happen with these greedy managers.
I do expect GM and Chrysler to merge and expect it will be a huge mess. I mean, look at Delphi, they’ve been in Ch11 for how many years now? Maybe they will come out this year, but look at how different they will be, I mean they just jettisoned how many? Almost 1000 salaried employees? And how many more before they emerge? Just goes to show you the managers at these companies have no clue how to successfully run a company, even when they have nothing to lose.
Now would be a great time for companies like GM, Chrysler and Delphi to just take a huge chance and develop some incredible long-shot product and see what happens – “make or break”, but their managers are all too short sighted for that.
Man, I need to get out of this industry… :)
Doodad… you’re not alone.
I also choose to spend my professional career in this industry. Thing is I only have spent 4 years so far.
And yes you’re right, even if countries and scales differ.
But I like this stuff… when I get tired, I’ll change =)
The Studebaker-Packard merger (1954) comes to mind. Packard died in 1956 and Studebaker struggled on for 10 more years. One post-mortem quipped, “in hindsight, it was like two drunks trying to help each other cross a busy roadway.”
Forget GM. With sales down, Cerberus should take the bold step of closing down 50% of their assembly plants and associated parts plants. For good. Take fleet sales down from the current 30-40% to a more reasonable 15% and they could probably get rid of more. Chrysler is expert in flex manufacturing so they can build several critical offerings on one line. Build only what they’re good at and maybe exit some sacred segments like mid-sized cars. Do this now, don’t wait. They’ll invite a strike, but sales are in the dumper anyway. Go long Nardelli! Hail Mary!
Right on, getacargetacheck.
They could go hat in hand to a spurned and burned ex-partner and within literally two months, have a better car than the Dodge Avenger on the lots ready to sell, manufactured right in America.
A rebadged/regrilled Mitsubishi Galant. The four cylinder version AND the very hot 3.8 V6 performance version. In comparison tests, the Galant may not be in the top 1/2 of the class, but it always beats hell out of Sebring/Avenger.
How about calling it the Dodge Dart? May as well have a few people with memories going back, give it a 2nd look and even possibly buying it….
Then the Nissan Altima rebadged/regrilled car could replace the Chrysler Sebring. Four and V6.
Call it the Chrysler Crown. Hey, why not?
You beat me to it, willbodine.
I gave Chrysler up for dead soon after Cerberus took over, and keep having to remind myself that they’re not dead yet.