Today’s been rather hectic, in a Swedish go-fish kind of way. I caught sight of this Bloomberg report on a possibile Chrysler-GM shotgun marriage this morning. And, somehow, it’s still there. “Chrysler LLC may be sending a message to President Barack Obama’s autos task force by saying the ‘best option’ for survival is a merger with General Motors Corp. that both sides have labeled dead.” ChryCo spinmeister insists that Bloomberg’s got it wrong: “We are in exclusive talks with Fiat.” Now that the supposed deal with Nissan is dead. And the one with Chery. And the previous talks with GM. Speaking of which, The General’s aide de camp, PR spinmeister Steve Harris, also ruled out an Alliance—I mean, alliance. Yes, well, JR didn’t want to marry Cally either. (You could say this doesn’t bode well for either automaker.) Now, some scary stuff . . .
While disavowing interest in new GM talks, Chrysler also gave an accounting of the merits of a merger that showed greater benefits than tying up with Fiat. Joining with GM would boost operating earnings for the combined company by as much as $58 billion over the next 7 years, and cash flow by as much as $54 billion, Chrysler estimated.
A merger would yield savings by melding purchasing, product development, distribution and technology investments, while merging the automakers’ finance units would help Chrysler dealers and customers, because GM’s part-owned GMAC LLC is now a bank-holding company able to accept and insure deposits, Chrysler said.
When I wake up, will Bobby Ewing be in my shower?
The term Chrysler used was PARTNERSHIP, not merger.
Which means more Renault-Nissan and less DaimlerChrysler.
Everybody knows that this is stupid, so I asked myself, why would Chrysler want to do that?
And then it came to me…Cerberus has officially given up. They’re cutting their losses and want to get out of this as soon as possible. And why a GM merger? Easy: Legacy costs. When Chrysler goes south, someone has to pay the pension and health care funds that have been robbed before. And that someone would be Cerberus and Daimler. I’m possibly fantasizing here, but that’s the only explanation I can think of. Maybe someone with some insight should check out the existing contracts. Who has to pay what in a possible C11/C7?
In an American Leyland situation, it would be easy to let Uncle Sam pay for the bills.
Cereberus is totally self contained on this deal, there is no way for anyone to get money beyond what they put in Chrysler LLC. They just want to get out while there is some value left of some kind and end the nightmare.
You just voted the most liberal member of the Senate in as President and you are surprised that he is nationalizing the unionized auto industry. Next week they will start the process of replacing the secret ballot for union votes with a system where the union puts a card in front of you and you sign it.
National Socialism for all.
sounds like a good idea to me!
I think the American Leyland metaphor goes only so far. A lot of the problems that British Leyland had are not applicable to GM & Chrysler. Leyland had truly antiquated plants using even older technology. The workforce was unproductive (some of North America’s most productive automotive plants are UAW facilities), hostile to management, and went on strike at the drop of a hat – with Labor party governments backing the unions. Quality on the cars was abysmal at best. Nothing Detroit has ever made had reached the nadir plumbed by British cars with Lucas electrics. Little money was spent developing new models or new engines.
For the most part the domestic automakers have had labor peace (albeit leaving them with high legacy costs), they’ve gotten their quality in line with industry standards, and have developed new drivetrains and cars.
Don’t get me wrong, I love Brit cars, but British Leyland only amplified the problems that already existed in the British auto industry. Those were a different set of problems than faced by the domestic automakers currently. GM’s problems aren’t so much a display of Dire Straits’ Industrial Disease as they are a product of a particular corporate culture – as Ron Kleinbaum emphasizes.
Regarding “American Leyland”; merging the failed companies is unthinkably bad (they all have too many brands, to many dealers and too many union employees, merging just multiplies those problems). But even keeping the companies on government welfare as separate entities will cause them to fall apart and eventually fail, just like British Leyland.
Anyone that doubts the British Leyland analogy only needs to look at GM laying off designers and engineers, canceling programs and attempting to sell off its position in China. All while keeping legally protected outside of bankruptcy, but worthless to the company, union employees and brands.
toxicroach:
Ditto. Chrysler is not a going concern, it is a horrible company that should be liquidated.
That liquidation would cost Cerberus nothing but reputation, but hey, as long as the taxpayers are willing to foot the bill Cerberus might as well avoid the embarrassment of having the company that it bankrupted go bankrupt on its watch.
GM is one thing, but if the government doesn’t have the nerve to let Chrysler go Chapter 7 then there is really no hope.
I may have to move to Sweden, where people still believe in the market and the rule of law.
Actually, the House is up for election in less than two years, so I won’t. Americans, including me, will find some politicians that have some nerve. The company extorting dealers and UAW are on notice. In two years game over. GM and Ford will survive. You won’t.
From Canada–This is where the bailout money is going.
“What you forgot to mention is, GM Oshawa has 2,400 employees that signed up for a similar buyout and most of them won’t be taking it ‘till late this year and early next.
“The total for these outrageous 4,000 buyouts (at $100,000 cash, $35,000 car coupon, 26 year seniority gets 30 year pension) is $2.5 billion dollars which has YET TO BE PAID.”
http://communities.canada.com/windsorstar/blogs/vanderblogger/default.aspx
Leyland had truly antiquated plants using even older technology.
Check
The workforce was unproductive
Check
(productivity means “product per dollar”…the UAW often says it’s “product per hour”, but this is just creative reinterpretation)
hostile to management
Check
and went on strike at the drop of a hat
Ok, not yet.
Quality on the cars was abysmal at best.
Check
(relative to their competitors they are. You have to compare BL to the competitors of its time)
Little money was spent developing new models or new engines.
Check
Would not a merger cost tens of thousands of democrat votes union jobs?
How could the administration go for that?
Besides, today they are going to nationalize the banks “at least for a short time,” per Chris Dodd (D) Senate Banking Committee Chairman and most favoured client of CountryWide Mortgage.
Nah. They’ll keep those democrat votes union jobs in place.