This is one of those “news” alerts where I check to see if it’s April 1. Not so Ray Wert. Jalopnik’s main man is happy to hook, line and sinker the The New York Times‘ story that “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.” There are three reasons why this story means WAR for TTAC. First, NYT scribe Bill Vlasic is a longstanding Detroit cheerleader. Second, the story backpedals in the second paragraph: “The talks between G.M. and Cerberus Capital Management… 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.” And this: why? What possible benefit would this deal be to anyone– save the consultants who’ve been paid millions to try to answer that question without laughing. The Times’ theory? “Given that both G.M. and Chrysler are struggling, the two sides may determine a merger may not be in their best interests.” Oops! Let’s try that again. “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.” About a week ago, we heard that GM was considering buying Jeep to combine it with HUMMER. We didn’t repeat that absurdity (until now). But then, we’re not the New York Times. Or Jalopnik.
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It sounds retarded at first glance but given the way American-style capitalism is exploding spectacularly, who knows? It could work. Even if it didn’t, would it matter?
When it fails, I just hope they don’t take Ford down with them.
Even if gas gets cheap again, the green wackos won’t let us burn it. Don’t forget that EPA has the power to regulate CO2 as a “pollutant” and they’ll clamp down, so the wackos have achieved their victory. don’t want those polar ice caps to melt, now do we?
Just wow… just wow.
I belong to the few that tend to believe The Times and for Death Watch series to have predicted this over 2years out. So Sad. But, can Rick now be FIRED.
GM-C?
Merge the suck. The only way I can imagine that starting is through Cerebrus twisting GM’s arm through GMAC in some way….
Toyota, yes, Chrysler, wtf?
K, Robert. I think you need to initiate the Suicide Pact Watch.
WOW! The auto industry version of Frankenstein, cobbling together a monstrosity from two corporate corpses, and just in time for the Halloween season. Imagine parts of a Pontiac Aztec stapled to parts of a Sebring convertible, and Rabid Rick’s diseased brain used for the ECM. I’m so scared now, I’m going to hide under my bed. Where is a mob of torch carrying peasants when you need them?
Detroit is FAWKED. I bet home prices there are going to plummet once this news goes to the mainstream media.
Poor Midwesterners. :( They are such hard-working folk. :)
Assuming this rumor has some truth to it, I cannot fathom what GM is thinking here. Let’s take one of the least competitive, least attractive product lineups (including three brands, two of which, Dodge and Chrysler, are virtually indistinguishable from one another), and pile it onto GM’s mishmash of highly unattractive cars and brands which GM has proven completely incapable of managing properly for decades.
Staggering. GM needs to go Chapter 11 so its creditrs committee can force them to sell off half or 2/3 of their brand portfolio. Because it;s clear that GM has no clue otherwise what to do.
Cerberus would be laughing all the way to the bank on this deal. They get out of a doomed company in Chrysler for what, cash? Even if they didn’t make a return on their investment, they would probably be happy not to lose too much.
This isn’t a rumor.
This is NEWS FROM THE FUTURE – TODAY.
Chrysler is DOOMED. They have nothing on the table, nothing on the drawing boards…
meanwhile…
GM is making the best cars its EVER MADE and losing more money than its EVER LOST BEFORE.
It makes plenty of sense for GM to buy Chrysler.
Hell, they could even re-release the 300 with a GM interior and the Sebring designed more like a CTS.
didnt they try something like this a little while ago in England? sort of the Group Hug of Death idea.
Edit: who says GM is buying Chrysler? it makes more sense for Chrysler to buy GM. Chrysler has alot more to gain.
WSJ indicates it would be a trade; the 80% of Chrysler that Cerberus owns for the 49% of GMAC that GM owns.
http://news.yahoo.com/s/ap/20081011/ap_on_bi_ge/gm_chrysler_merger_talks
GM would trade the rest of GMAC to Cerberus for Chrysler even-steven?
Ashy Larry,
According to Jalopnik, one of the guys who broke that story for the NYT suggests that Cerebus will own a majority stake in the firm if this deal goes through.
That being said, the NYT article mentions a possible shotgun wedding between Chrysler and Nissan/Renault, and that would make a little more sense. Just rebadge Renaults as Dodges and Chryslers, and it could work out. There may be some overlap now between, for example, the Espace and the Town & Country/Caravan, but maybe when both vans are up for another refresh, they both could be reworked in some sort of synergy. Or something. And the Megane could be perfect as-is. The possibilities are endless.
The only car company that has much to gain from buying GM is Toyota. They could drop 5 bil, a hefty takeover premium LMAO, and still force the company into bk.
They can then dictate stern but fair terms to dealers and the union. A pared down GM is easily digested by Toyota. The union begrudgingly (yet greatfully) disbands in exchange for rock solid job security, and dealers compete with one another to be surviving franchises. Toyota has pure leverage, because they can walk away from the purchase if there is a failure to cooperate and still be healthier than any other producer. Even Congress is quick to praise and endorse the new arrangement. Now that is power.
Europe would be quick with the antitrust, of course, but there are workarounds for that.
We didn’t repeat that absurdity (until now). But then, we’re not the New York Times. Or Jalopnik.
No you’re not.
The only car company that has much to gain from buying GM is Toyota.
Maybe if Toyota looked at the Corvette and learned how to make fun-to-drive cars again, maybe. But if they discontinue the Corvette, there will be hell to pay…
You’re right about one thing. You’re certainly not Jalopnik.
Cerberus has finally realized how stupid they were for taking on Chrysler and GMAC. If there’s $1 in liquid assets left at Cerberus it would be a miracle. So dump it all on GM. Given that Mr. Wagoner ain’t no brainiac either this is probably a done deal. But the strange thing is it could actually work. Assuming the world economy doesn’t continue it’s ride to hell in a hand basket.
Here’s hoping when I pay off my Accord in four years I’ll have some really cool domestic options from which to choose.
I was just thinking…
First, in Nov. 2006, Cerberus completes their acquisition of 51% of GMAC. Second, in Aug. 2007, Cerberus completes their acquisition of 80.1% of DaimlerChrysler. Third, Cerberus offers Chrysler to GM in exchange for the rest of GMAC.
We’ve been wondering all this time what the hell Cerberus was doing in the auto manufacturing business and what they were gonna do with Chrysler; were they gonna strip-n-flip it? Well here could be the answer. Maybe they never planned on stripping it, only flipping it, and GMAC was their real target all along. I’d bet that these talks are less about GM acquiring Chrysler and more about Cerberus acquiring GMAC.
Now for what would Cerberus want the failing GMAC? Maybe they think they can turn it around and make some profit once the economy smoothes out. Or maybe they think they can get a piece of the $700 billion mortgage bailout…
The Titanic rescued by the Lusitania.
@Cicero:
or the Hindenburg…
How can there be a merger, when they have such conflicts of interests? Is it another “merger of equals”, or is it a wholesale takeover? Because, I can’t see them survive both at the same team, in this deal…
Last evening CNBC was making “Hay” on this whole story.,it consumed them for over three hours, I finally turned off the the TV and went to bed,Did I dream this??
It’s official, GM’s board of directors and the executives have completely lost their minds. As folks have said in the past, Jeep is the only thing worth saving, but I can only see GM screwing that up as well. If there is a method to their madness and this comes up positive for both GM and Chrysler, Rick will be seen as a friggin genius, no matter what else he’s done to the company.
Scary, scary times.
Maybe they will now have 6 versions of each model with different branding than the 3 each one has!
Well, if the result of all this news haymaking is that Ford gets to survive (because of the tsunami of suck GM-C would provide), then yay merger.
Personally I see Chrysler surviving only as a part of Nissan, whence the quality and reliability of the merged product goes up.
A new Chrysler 300 on a less expensive M35 chassis would work.
Personally I see Chrysler surviving only as a part of Nissan, whence the quality and reliability of the merged product goes up.…
The worst American interiors paired with the worst Japanese interiors…but then, folks, we could get the VQ in the V6 Challenger after all that chatter bantered about in the Challenger review…
Nice job on that new corporate logo, BTW.
From President Bush’s remarks Friday:
“Thirdly, we are concerned that some investors could take advantage of the crisis to illegally manipulate the stock market. So the Securities and Exchange Commission has launched rigorous enforcement actions to detect fraud and manipulation in the market. The SEC is focused on preventing abusive practices, such as putting out false information to drive down particular stocks for personal gain. Anyone caught engaging in illegal financial activities will be prosecuted.”
No clue as to why I read this story and thought of this quote. lol
The WSJ article has some lines that could have been written for Leno:
“Financial conditions have gotten the better of Cerberus, which originally viewed its investments in GMAC and Chrysler as relatively low-cost paths to owning some of the country’s biggest brand names.
“In 2006, it agreed to buy a majority stake in GMAC for $14 billion, hoping to ride momentum at GMAC’s then-profitable mortgage arm, Rescap, and expand the car-lending business’s reach in a global auto industry that was projected to grow rapidly. Cerberus was also hoping that by de-linking GMAC from GM, the lending company’s credit rating would improve, therefore lowering its cost of capital.”
And the punch line: “Little has turned out as planned.”
Here’s an intesting paragraph:
“Last year, Cerberus acquired its majority stake in Chrysler from Daimler AG, ending the 10-year-old merger of the maker of minivans and Jeeps with the German owner of Mercedes. Daimler gave Cerberus $650 million, while Cerberus agreed to contribute $7.4 billion into Chrysler, including $5 billion into its auto operations. Much of that cash hasn’t been spent.”
So as part of the Chrysler deal in which Daimler would still be a partner, Cerberus agreed to put in $7.4B, but hasn’t done it? Is this what the above means? If so, and Cerberus now sees following through as throwing good money after bad, and with more good money needed in the future, Cerberus might see an exit here to cut their losses. One would assume they’ve shopped this thing all over hell with no takers. And that $5B- would look very good to GM right now.
“Despite the complications that would come from owning Chrysler, there are some attractions for GM. Namely, it could slash costs by cutting plants, blue-collar jobs and corporate overhead, according to people familiar with the matter.”
I don’t see any mention of profit in there, but since Wagoner seems to think he’s in the cutting business instead of the profit-making business, here’s something he could do.
Maybe it has to do with the $25B government bailout?
Fewer Detroit companies means fewer companies to share that loot.
You know that American-Leyland line I’ve been flogging for some time now? It really could happen.
British-Leyland was cobbled together, partly at the insistence of the UK’s government, in an attempt to save the UK based auto industry by merging all of the struggling makers into one company. Foreign based competitors with large home markets, advanced technology and superior labor relations were all slowly cleaning the clocks of the once strong English automobile business.
We all know how it turned out.
Whether or not it will happen is unknowable right now. Usually when a story like this surfaces it is because of an intentional press leak by one or both parties to the negotiations. They may be leaking it to see how the government and investors react, which is called “launching a trial balloon”.
In normal times the FTC might block such a merger, but right now I suspect they wouldn’t get in the way. There would be some pressure to get it done before January when a new administration takes over.
The cost savings could be huge. Chrysler’s entire power-train engineering and manufacturing operations get phased out. The Ram truck lineup gets the GMC treatment of being Chevy trucks with a nose job and trim options. Jeep-Hummer gets merged. GM has a minivan lineup again. Dodge and Chrysler get the same treatment as the rest of GM’s secondary brands. GM would once again get to be the world’s largest automaker, at least for a while. This is the kind of deal the suits in Detroit love.
It’s been a busy morning. I was cleaning out the garage when the newscast on the radio announced the story about the talks between GM and Cerberus. So I have been visiting Autoblog and Allpar as well as the news sites trying to absorb this.
I found some interesting posts on Allpar. A lot of us here think the whole automotive world revolves around GM (how many Deathwatches now?) but there are fans and followers of other automakers. I thought it would be interesting to share some of their thoughts:
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Why merge with GM? It’s like attaching a canoe to the Titanic and calling the contraption seaworthy.
BR Miller
Something tells me this story is overblown.
Remember, the media was reporting that Chrysler was out of money, too. That turned out to be utterly false.
Perhaps Cerberus is sniffing around GM to see if there’s opportunity there too, but I would say “no.” GM needs to fix its own problems as does Chrysler. Merging them would be a logistical, labor and financial nightmare and there’s literally no upside for Cerberus.
Incidentally, Chrysler could buy ALL of GM on the stock market, right now, for about $3.8 billion, or about 34.5% of its cash reserves.
Why wouldn’t it just buy the pieces it wanted, at firesale prices, as opposed to merge and inherit all the problems of GM? A couple billion dollars could pick up the GM assets that Chrysler wanted, and they could just euthanize the rest of it.
Doesn’t make sense to merge.
BR Miller
Maybe you’re on to something, with Chrysler (Cerberus) buying GM.
However what’ll happen with the small-car (B-segment) and pick-up truck deal between Chrysler and Renault-Nissan?
EDIT: Just taught of something, maybe Ghosn might act behind the curtain as well, with partnering not only with Chrysler but also with GM (a much more bigger joint-venture then the European Vauxhall/Opel Movano and Vivaro-Renault Master & Trafic), then killing 2 birds with one stone. Ok I need to stop imagining such conspiracy theories (rolleyes)
Stéphane Dumas
Hopefully this is just Cerberus shopping for deals. I still think Hummer is up for grabs and GM needs cash. I could see Hummer fit into the Jeep line up.
The whole Ghosn/Renault/Nissan thing makes me wonder too. Maybe Chrysler buys GM, keeps the pieces they want and sells Ghosn the pieces he wants. Some parts of GM could give Chrysler a much better global position. Although after the past few weeks of this market insanity, my brain hurts just thinking about this whole mess.
edaddy
OK, OK, stop the presses. I am proud to announce I am acquiring GM for 57 cents I found in the sofa, an old sock, and my 1982 Dodge Aries wagon.
BR Miller
Both articles I read talked about “unnamed sources.” After everything that “unnamed sources” have said since the acquisition of Chrysler by Cerberus, I’m not going to believe anything will happen until it actually does — IF it does. If all these “unnamed sources” knew anything, then Chrysler would not exist right now.
DBR96A
This doesn’t make any sense on the face of it. You all know this would not be a merger, it would be GM taking over Chrysler. Aside from a few Jeeps, GM has a competitive model for every vehicle Chrysler sells. GM has too many dealers. GM has too many brands to effectively market. The only way it would make sense is if there was a third party involved. For instance, let’s say that Cerberus wants to sell Chrysler off, and wants to buy GM’s remaining stake in GMAC. And let’s say that Cerberus doesn’t want to spend any cash doing it. GM would probably like to sell their share of GMAC, and they definately want cash, NOT Chrysler. A foreign auto manufacturer has an interest in Chrysler, and has cash. So, Cerberus trades Chrysler for GM’s remaining interest in GMAC, and GM in turn sells Chrysler to, say, a company like Nissan. I’ll admit, that’s quite a stretch…….
CNT900
I’ve been buried in real work for the last few weeks — I’m in the investment biz, as some of you recall — but I have two cents to offer on this:
1) This really could happen. It would not be a “stake” or a “technology sharing agreement” or an “alliance”, it would be Chrysler’s vehicle manufacturing operations subsumed into GM. It is a real possibility and it could happen very quickly.
2) It will only happen if GM — which despite what you guys here might like to believe is NOT run by stupid people — thinks it makes long-term business sense for them. And it might.
3) There is a sense inside Cerberus that they got in over their head with Chrysler. They don’t have an institutional understanding of the car-making business, and they especially don’t have an understanding of how to shepherd an auto company through hard economic times. If they can swap Chrysler-the-manufacturer for GMAC — a business they DO understand at a very deep, basic level — it’s an opportunity they are compelled to explore.
4) Speculation as to what this might mean for current and future vehicle programs is way, way premature. I doubt anyone below the level of Lutz’s and Press’s senior staffs has any idea how the product side of this might work yet, and even those folks are probably just batting ideas around at this stage.
georgejetson
What would GM get?
LX cars, Jeep and minivans. That’s all. They wouldnt want rest.
It would cost them billions to close all the other plants. Not going to happen.
marco
Sounds like a deal for GM. Trade the remaining GMAC stake for Chrysler. Keep the bits you want (Jeep, etc), scrap and sell off the rest. End of Chrysler.
magnum4.7
Not really, it would cost them billions to scrap the rest. Something GM doesnt have. And I am not even talking about dealer network – more billions.
marco
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This makes about as much sense as a surgeon having the attending nurses swing a patient back and forth in hammock.
I refuse to believe it.
I agree… a Chrysler purchase makes little or no sense for GM- a company that already has more brands than it can handle. It’s possible GM could acquire Chrysler, keep Jeep and shut down Chrysler’s automaking operations.
But would acquiring Jeep be a net gain in the current environment? Possibly, but I can’t help but think that Jeep has already seen its best days for a while.
I keep imagining that Renault/Nissan or VW will eventually get Chrysler – assuming an Indian or Chinese company doesn’t step in if the Europeans hold out just a bit too long.
Either way, any potential deal with GM would have to involve no cash expenditure on the part of the General – and possibly access to a lot of cash in the months ahead.
Two sinking ships combined still makes one larger sinking ship.
There’s no way any company in their right mind would want either of these two companies until they hit ch11. The billions anyone would have to sink to fix the issues and pay the debts they’ve both amassed is staggering and I really can’t see anyone stepping up to buy them until the pieces are on the chopping block after the UAW and the dealerships are out of the picture (talking foreign here).
I can’t even imagine Cerberus is that nuts, but then again they bought into Chrysler so who knows.