New York Times scribe Bill Vlasic set the U.S. automotive industry abuzz last night, reporting that GM and Chrysler were discussing a merger. Careful reading of the article revealed that the story had more holes than a block of Emmantal. It included unocorrobrated, unnamed sources; backpedalling a plenty and language couching that seemed carefully designed to maintain what Ronald Reagan’s administration famously called “plausible deniability.” Oh, and it didn’t make any sense. Today’s follow-up— declaring that GM and Ford were looking to hook-up– is even less credible, AND less equivocoal. [NB: Again with the “two people.”] “In July, G.M. approached Ford with a proposal to combine the operations of the two biggest American automakers. The talks involved several meetings between G.M.’s chairman, Rick Wagoner; its president, Frederick Henderson; Ford’s executive chairman, William C. Ford Jr.; and its chief executive, Alan R. Mulally, people with knowledge of the process said… Ford broke off the talks in September, these people said. Mr. Ford and Mr. Mulally were said to have concluded that their company had a better chance to reorganize on its own than in tandem with another automaker.” TTAC’s take: While such a high-level meeting may have taken place (and it may not), again, the automakers had plenty of things to talk about other than merging: federal loans, federal bailouts, federal regulation, etc. [thanks to Robert Schwartz for the link]
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American Leyland!
I’m not clear about which pickup logo Calvin should be peeing on. Until that’s cleared up, a merger just doesn’t make sense.
A full on merger between American automakers just doesn’t sit right with me, in fact I think it’s consolidating brands that got them into trouble in the first place.
GM and FORD must never merge.
We need two or more companies able to compete with each other so we see cars made with different philosphies.
I’m not worried about Chrysler merging with GM cause they have nothing on the table right now. But FORD must stay right where it is and GM must too.
Chrysler has nothing that Ford or GM doesn’t have already. What do they bring to the table?
Ford will not merge with GM. What does GM have that Ford does not? Two mode hybrid, perhaps…but that doesn’t sell. Also, the Ford family would have to give up control. Fat chance. And GM is bleeding cash like a hemophiliac in an iron maiden…
This reminds me more of a mafia sit-down than anything else. Or the Yalta conference, where Stalin, Churchill and Roosevelt met and divided the world between them. And that’s what I think is going on in the talks between GM, Ford and Chrysler. They are discussing how to divide the loot between them, 25 billion dollars is an awful lot of money, and there has to be some concerns about what goes where and to whom.
The executives in question would be derelict in their duty not to sit down and discuss mergers as one possible way to survive this environment.
There are far more global automotive suppliers than the market can support. More mergers and/or outright closings are going to happen.
The Wall St Journal is now reporting that just last quarter GM tried to merge with a Fig Newton.
Apparently the Kiebler Elves just could not see enough upside to the deal and talks were called off.
None of these companies will merge becuase a company can only have one CEO, and none of the leaders of the big three, or at least those at Ford and GM, are willing to give up the throne.
I think Ingvar has it right, they are working with eachother on how to divide and grow the corporate wellfare.
Cerberus’ Chrysler CEO is a hired gun who doesn’t have any history in the car business. It would not take much cash to make him go away.
Ford and GM would be a very hard merger to make happen, but somebody is going to pick up the pieces of Chrysler. They do not have the scale required to compete in today’s automotive marketplace.
How many cell phone makers of consequence are there?
How many computer makers matter of size are there?
How many appliance companies share the US market?
In nearly all industries a company which doesn’t have at least 30% or more market share is unlikely to be able to be profitable over the long term. General Electric has long had a strategy of getting out of any manufacturing business where it doesn’t have at least that kind of share. Unfortunately for GE, they were seduced by the easy money of playing banker and got into a game where they were but one of many … and that piece of the business is killing them right now.
Chrysler is simply too small to survive as it is. Piecemeal product sharing deals aren’t going to get it done for them either. Heck, even the ultimate niche automotive companies like Rolls-Royce and Ferrari had to become part of larger enterprises to survive.
The wrong lessons have been learned from the Daimler-Chrysler disaster. The lesson should be the importance of doing acquisitions right, but people seem to think that the lesson was “mergers don’t work.” Daimler screwed up in myriad ways, starting with the absurd fiction that they were doing a merger of equals.
Things are going to happen.
What?? The NYT got its facts wrong or is basing assumptions on faulty data? Well this is just a complete shock.
The way the American automotive industry is right now the proper logo would be Calvin pissing HIMSELF.
“Robert Schwartz :
October 11th, 2008 at 7:40 pm
American Leyland!”
Exactly!
Cerberus just wants this Chrysler nightmare to end. They’re in the same situation as Daimler when they had the Chrysler albatross. Wagoner sees the wall coming at him and is drooling over some cash Cerberus is waving as a means of postponing his demise. With seemingly unlimited money from the feds available, Cerberus sees value in GMAC and a black hole in Chrysler. The manufacturing capacity and dealer network of Chrysler are worth nothing in today’s market. It’s a bad policy to hand out fed money to these companies without strings attached as to management. We may not want so much govt involvement, but without it, it’s just a non-stop handout.
” What?? The NYT got its facts wrong or is basing assumptions on faulty data? Well this is just a complete shock.”
Would you have thought differently if the story first appeared in the New York Post?
You would have to search long and hard to find two papers with a more different political bias than the New York Times and the Wall Street Journal. When both are reporting similar stories it is highly likely that there is indeed fire to go with the smoke.
Usta Bee:
I want that sticker.
“Plausible deniability” notoriously surfaced in US politics during John Kennedy’s administration. The term was well worn by the time of President Reagan.
It would economically in the end not make sense – but why do you deny that such ideas of Merger between GM and Chrysler or Ford took place at all?