There’s a reason the headline above attributes this “story” to The Detroit Free Press. Let me put it this way: “people familiar with the situation,” “one of these people added,” “other observers,” “one person told the Free Press,” “a person briefed on the talks,” “several analysts have speculated,” and “a person briefed on the strategy.” Seven references to unnamed sources? That’s gotta be some kind of record– and not for reputable journalism. OK, be that as it may, The Freep is asking us to believe that there’s method to this banker-lead executive hysteria. “If a merger is consummated, Chrysler’s brands would become just like Chevrolet, Pontiac and Buick, people familiar with the situation tell the Free Press.” And that’s a good thing? “Conflicting brands could be dealt with in a few years after this industry turmoil has passed, one of these people added.” Later. Got it. “Another concern raised by analysts and other observers regards the addition of 3,500 Chrysler dealers into GM’s already over-dealered network. One person told the Free Press that those ‘excess dealers’ would cost GM nothing in the short-term and that some — if not many — will fail on their own anyway.” Later. Got it. Of course, Ace scribe Tim Higgins has more conjecture information on GM’s thinking…

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You may recall that we gave Jim Cramer shit for voting for GM’s stock before he voted against it. Yesterday, while listening to my local talk radio financial advice show… sorry, what was I saying? Right. I’m awake. I’m awake. A caller asked if they should buy GM stock, ’cause you know it used to be a 40 and now it was at 4 and wow such a deal. The expert said Hell no; GM was going to be broken-up and/or go bust. As the Autoextremist might say, that’s a barmitzvah-sized coffee urn of not good. When TTAC started the Death Watch, the experts were singing a different tune. And the General’s public knew nothing– as in zilch– about its troubles. Now that the financial crisis has hit the mainstream press, GM’s distress is an open secret. How long before the possibility of C11 affects new car sales? Maybe not now, but soon. Meanwhile, there are plenty of people either ignorant or willfully ignorant of what’s going down at GM (hint: GM). Here’s a comment from Al “Who He?” Diaz over SocialPicks.com (“Invest Smarter Together). Oh, Al reckons GM’s a buy. “I have confidence GM will make necessary adjustments to ensure the merger with Chrysler goes through by the end of October; ensuing cuts WRT Plants and other hourly wage earners should help the company get back on its feet and in time the fruits of their labor will become apparent. I don’t see GM going out of business anytime soon.” But when he does…

No surprise there. But it’s nice to see someone else noticing that GM’s repatriating profits from foreign ops to keep the corporate mothership alive. [Note to GM’s BOD: we’d love to see some hard numbers on that.] That someone is Bertel Schmitt. I’m not sure where Berty gets his info, but the CEO Sinamotive Group (HK) Limited writes, “Bob Lutz, GM’s vice-chairman, said GM is making plans to move money from Chinese operations to the U.S. in order to compensate for North American losses. Since nobody seems to want to buy the Hummer brand, which GM put up for sale, repatriating profits from China is one of the few options left for GM. Draining the huge, vibrant and growing China market of funds while the rest of the world tanks doesn’t sound like such a good idea, but these are desperate times. ‘We do not rule out such a possibility under current conditions,’ Lutz said. (Translation: We are already preparing the transfer.) The withdrawal will not sit well with GM’s joint venture partners. When cash is king and credit is an endangered species, cashing in will be extremely unpopular.” Oh, did we mention that Chinese auto sales have stalled, and GM’s share of same has diminished? Seems churlish, but there you go.

Deploying its best practitioners of English understatement, Reuters translates an Auto Motor und Sport interview wherein GM COO Fritz Henderson says the “hard-pressed U.S. car market” may have reached bottom after “a dramatic fall” last month. “This September was the weakest month (in years) but I think all the factors that influence consumer behaviour have since emerged. We could have reached the low point.” To substantiate the claim, the former CFO (just like Rick!) spun the previous spin: GM has seen “improved demand” for pickup trucks in August and September. (Improved from what and at what cost in terms of profits? Not specified.) “I don’t mean to say that this marks the turning point. But oil prices have come down and consumers are buying pickups again. That helps us. I am optimistic about our future products but the market has to stabilize.” Which isn’t exactly true: the U.S. new car market seems to have stabilized at 12m units p.a.– roughly 2m lower than Fritz was predicting last spring. At that level, bumping along below a 20 percent market share, GM cannot a profit make.

First, this from Chrysler’s September sales press release. “Chrysler LLC’s minivan sales continued to thrive in September based on their strong appeal as fuel efficient, multi-passenger vehicles. Compared with September sales in 2007, the Chrysler Town & Country achieved a 6 percent increase with sales of 9,229 units, and the Dodge Grand Caravan increased 6 percent with sales of 11,056 units. With more than 12 million minivans sold worldwide in their 25-year history, Chrysler and Dodge minivans still command 40 percent of the U.S. minivan market.” Now this from CBCnews.ca. “Chrysler said Friday it will eliminate one shift at its Windsor, Ont., assembly plant over the next three weeks… CAW local 444 President Rick Laporte said he’s aware the company is trying to re-adjust inventory since minivan sales have dropped. ‘My understanding is the minivan sales have really fallen off; my understanding is they have actually fallen off 25 per cent,’ said Laporte, whose local represents about 5,000 workers at the Windsor minivan assembly plant. ‘There’s no orders — the dealer’s have got all they need at this point in time, so that’s why they’re slowing down.’ Each shift employs between 1,200 and 1,500 workers. The employees will be able to file for unemployment insurance and supplementary unemployment benefits.”

TTAC called this back in January, when we first heard reports that construction had stopped on a $530m Getrag transmission plant in Tipton, Indiana. The factory was designed to crank-out DSG-style (dual clutch) transmissions for the Phoenix V6 engine program. Our initial instincts were correct: Chrysler has cut bait on the deal. ChryCo’s official FOAD came despite (because of?) the fact that they’re suing Getrag for breach of contract. Chrysler alleges the supplier failed to raise an agreed $300m in debt financing to build the plant. “Getrag said on Friday Chrysler had rejected a financing structure it offered with banks,” Reuters reports. “[The arrangement] required Chrysler to secure some of their obligations under the supply agreement.” Translation: Chrysler refused to guarantee factory finance with its assets. “Getrag is still evaluating its options in light of Chrysler’s decision… It also said it would seek reimbursement from Chrysler for expenses incurred by Getrag and its suppliers in the project.” Good luck with that.

God knows some journalist somewhere is checking to see if Joe the Plumber paid the vehicle tax on… whatever it is he drives. OK, so the profile: plumber, aspiring licensed plumber, aspiring licensed plumber aspiring to own his own business (I’m sure Joe’s boss was a bit nonplussed by that one). Does he need a worktruck? If so, his boss would probably provide it (and claim it as a depreciating asset). So what do we reckon Joe makes a year now? Fifty k? And let’s say his wife works too. Does he even have a vehicle of his own? And if he did, what would it be?

Whew! Quite the headline. But that’s how GM rolls these days: save the bad news for Friday afternoon and couch it as “cost savings,” “re-sizing” or some such nonsense. Anway, Reuters reports that The General’s hammered-out a deal with the International Union of Electrical, Radio and Machine Workers (IUE-CWA) union to close the ailing American automaker’s Moraine, Ohio SUV plant, home of the deeply unloved Chevy TrailBlazer and GMC Envoy. As it says above, GM will pay $1.6b into a health-care trust (VEBA) for IUE-CWA retirees and offer 1500 union members up to $140k each to head for the bar to talk about “the good old days.” The IUE-CWA pronounced itself satisfied with the deal. “It’s like getting paid not to breed Dodos.” No, seriously, union reps said they’d set up a board to manage the VEBA account which will take effect in January 2012. Now, I know what you’re thinking. Did someone forget to tell the union that GM’s heading for Chapter 11? Nope. But when faced with the inevitable, what were their options? See you in court, fellas.

Autoincar.com reports that Honda CEO Takeo Fukui is down with the U.S. Department of Energy’s $25b loan program. You know the boondoggle that provides no-to-low interest loans to automakers for retooling 20-year-old-or-more factories to build more fuel efficient vehicles than previous. Which could include a Honda factory, but won’t, ’cause Honda isn’t hemorrhaging cash. And there’s a reason for that relative success vis a vis The Big 2.8. “The times have changed,” Fukui said. “Their response was too slow.” Fukui also claimed Honda avoided disaster by not expanding into the pickup truck sector. “We didn’t dabble in that, and that worked out well for us,” he said at a Tokyo hotel. Anyway, never mind. No harm, no foul. And U.S. federal aid to the truck-heavy domestics is no biggie. “It is totally proper for the U.S. government to help out U.S. automakers.”

A Chrysler – GM merger is a mind-boggling prospect on many levels. But the over-arching question is simple enough. Why? Why in the world would General Motors want to combine with Chrysler? Given their respective balance sheets and future prospects, the analogies pretty much suggest themselves. My favorite: the Titanic rescuing the Lusitania. But if you want to understand the logic behind this merger deal, such as it is, we’ve got to explore a different metaphor: “changing horses mid-stream.”

I know that car critic Dan Neil lives on the Left Coast. (I Googled the “LA” in “LA Times“). And I know that anyone with a college education living west of the Rockies (or north of Houston Street in Manhattan) must espouse hatred of gas-guzzlers, lest they face death by arched eyebrow. But you’d hope that Dan’s Pulitzer Prize would give him the freedom to detour from the usual guilt trip every now and then, pull in at a rest stop and review a fast car for what it is. Which is fast. Did you know that the Corvette ZR-1 is fast? Dan’s gonna tell you– after 10 paragraphs of rhetorical mea culpa throat clearing. “What you would do is line up the ZR1 on some empty straight of tarmac and nail the throttle. To do so is to throw yourself on a horsepower grenade. Even with traction control engaged, the wheel spin is enough to cause the ZR1 to sidestep in a cloud of Michelin-flavored smoke and thunder. A half-second later, the tires hook up and you’re drowning in your own spit and hallucinating speed. In less than four heartbeats (3.4 seconds), you’ve gone through 60 mph and you’re grabbing second gear.” And it handles! In fact, “the ZR1 has more lateral grip than the world’s current supply of Polident.” Now you know. So do you feel dirty? Dan does. But he’ll get over it. At least in private.

Hail Vs Car

I once made the mistake of asking Jim Dollinger to fax me over a list of all the GM incentives in play. I swear to God I threw away my fax machine afterwards; I ran out of that stupid carbon crap at 15 pages, and we’re talking about a non-mid-life compatible typeface size. Anyway, now that GM’s last– I mean “latest” Employee Pricing for Everyone Sale is done, the automaker’s amping-up the incentives to its last redoubt: GM employees. (If you doubt it’s a readoubt, read out this pdf re: GM North Central’s sales figures). Automotive News [sub] reports that the General’s offering the discounts to “GM employees and their extended family members, and employees of GM suppliers and GM dealerships — essentially anyone who knows anyone who knows someone who qualifies for the GM employee purchase price, said Jim Bunnell, executive director of GM’s channel support group.” Support group? Do they hold hands and sing Kumbaya? Anyway it’s an extra grand (The Chevrolet Malibu, Traverse and Avalanche; GMC Acadia; Saturn Outlook; Buick Enclave; Hummer H3; Cadillac CTS; and light- and heavy-duty versions of Chevrolet Silverado and GMC Sierra extended-cab and crew-cab pickups) or two (Chevrolet Impala, Pontiac G6, Saturn Aura, Buick Lucerne, Saab 9-7X, Cadillac Escalade, Hummer H2 and light-duty versions of the Chevrolet Silverado and GMC Sierra regular-cab pickups) on the hood.

The auto news biz is abuzz with rumors of Chrysler’s endgame. Even a quick scan reveals that there are more potential scenarios and pitfalls than Operation Eagle Claw, America’s ill-fated attempt to rescue its hostages from Iran. Cerberus trades Chrysler to GM for GM’s remaining share of GMAC. Chrysler sells Jeep to Renault and the rest to GM. Chrysler parts out the company and THEN declares Chapter 11. But no matter how this plays out, foot soldiers will be sacrificed, the American auto industry will remain bound and gagged and the generals will get off Scott free.