BREAKING: GM and Chrysler talking about merger
by Damon Lavrinc on Oct 10th 2008 at 11:04PM 
Our heads are still reeling from one of the most tumultuous financial weeks on record, and the auto industry was far from immune. But despite our best efforts to drown our concerns in Racer5 IPA, the hits keep coming, and this time it's courtesy of the New York Times.
The Gray Lady is reporting that General Motors and Chrysler have been in talks about a possible merger for the past month, that "negotiations are not certain to produce a deal," "would most likely still take weeks to work out" and that two unnamed sources say that the chances of the merger going through are "50-50." Obfuscate much?
With GM's stock prices ending the week below $5 a share and Cerberus – the private equity firm that owns Chrysler – grasping at the flimsiest of straws, including continued talks with Nissan/Renault, a merger of unequals is two parts disturbing and one part intriguing.
Cerberus' people haven't been returning phone calls and the only comment offered to the NYT from the General's spokesperson, Tony Cervone, was, "Without referencing that specific rumor, as we've often said at GM officials routinely discuss issues of mutual interest with other automakers." Broad, unclear and exactly what we'd expect.
The merger of GM and Chrysler would put Cerberus in charge of an "unspecified equity stake" in the corporation, making the two-headed General-Chrysler (or Chrysler Motors?) the world's largest automaker, controlling over 35 percent of the U.S. vehicle market, causing rifts among brand faithful and offering more potential (vehicle) cannibalization than the Donner Party. Not to mention both automakers' labor contracts, supplier dealers and slipping market share. Shocked? Don't be. We give it a snowball's chance on the Sun. Thanks to ALL who tipped in.
UPDATE: Official statement from Lori McTavish, Executive Director, Communications, Chrysler LLC:
Chrysler LLC as a matter of policy does not confirm or disclose the nature of its private business meetings. As we have said, the Company is looking at a number of potential global partnerships as it explores growth opportunities around the world. Beyond those partnerships already announced however, Chrysler has not formed any new agreements and has no further announcements to make at this time.
[Source: NYT]
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Reader Comments (Page 1 of 6)
Adam H. 11:31PM (10/10/2008)
holy freaking crap, I am glad I jumped ship from GM while I could. Unfortunately for my UAW mates, things look grim.
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Justin 12:05AM (10/11/2008)
To a degree, the UAW got them here. No that the corporate execs aren't to blame either.
It's just other companies have proven you don't need unionized labor to build quality autos and keep your employees happy.
You were probably wise to jump when you did.
Kotse 4:41PM (10/11/2008)
A GM/Chrysler merger...so who actually "eats" who?
Jeff 11:34PM (10/10/2008)
I tipped in :-) Saw this as it happened and the autoblog tip line was my first stop. So much for Toyota being #1....hahahahah.
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Temple 6:10PM (10/11/2008)
Toyota being the largest automaker is the least of GM or Chysler's worries. There is absolutely nothing to cheer or laugh about in this situation. This is a fight for survival.
Bryan 12:14AM (10/12/2008)
@Temple
I agree this is a fight for survival. I was thinking about this for the last few weeks and wondering if we were going to have an American auto merger.
Steve 11:35PM (10/10/2008)
Wow, why though would two companies with similar product lines and the same raft of problems chose to get together? To double their problems? It's not like one would be interested in the other's properties. 35% yes, but much of that is duplicated effort which would not stand in the newly merged company.
Perhaps they are taking partnership in order to leverage better purchasing or something like that.
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Ayatollah Rodriguez 1:16AM (10/11/2008)
Steve SIMILAR?????????????? They are almost the same. Plus Chevy has a new truck..................it's biggest competitor as we speak is..............RAM.
How long will this go on.
FIRE RICK
arturo 2:12AM (10/11/2008)
If this two merge I am sure it would be temporary, until both companies are back on their feet. they would not double their problems. If both of this companies share the technology they have, together they could make vehicles that are safer, fuel efficient and possibly at a lower price with a higher quality. Its matter of time to see what this two are capable of doing.
Bondtastic 10:14AM (10/11/2008)
I see this as a purely survival move. GM MIGHT get through the year, but everything I have read says they will be dead before half of 2009 is out. Chrysler is probably walking dead already and we don't know how bad it really is (private). They merge together and they might make it out of the financial crisis and then they will talk about staying together past that. They don't merge and it's likely lights out for both.
Ford Wannup 10:36AM (10/11/2008)
There is only one overwhelming reason for this merger: to secure a gov't bailout when the merged companies are on the brink of collapse, by making the monster "too big to fail", with ever greater consequences against suppliers, dealers, finance companies, employees, etc.
Otherwise, it's senseless from any other standpoint. Both companies need another brands like they need holes in their heads. The benefits from consolidated purchasing will not, if ever, be felt for years to come. The impact on their existing global reach is non-additive.
Judy Zik 11:13AM (10/11/2008)
This merger doesn't make sense. Two completely overlapping product lines. GM needs more brands like it needs a whole in the head and Cerbyler hasn't been building anything that GM would want. The Jeep brand is worth something but at a time when people are fleeing from SUV's even it isn't that attractive. From GM's side this doesn't make sense. Unless...
Maybe GM is really getting desperate. Maybe Cerberus has the cash to keep GM afloat until their new products come out and is using this as a way of basically buying GM. GM has a lot of tech and decent product. A combined GM/Chrysler would be a better position for Cerberus than Chrysler on it's own.
I really hope this doesn't happen though because the net effect of job cuts would be horrific.
Tool 11:41AM (10/11/2008)
A GM-Chrysler combo would only exacerbate the problem that these two companies have: too many brands, too many models, too many dealers.
IF this merger goes through, the only way it would work is if there was a major rationalization to combine the brands into 2-3 mega brands: Chevrolet, Cadillac ang Jeep.
MachinaDC5 11:35PM (10/10/2008)
Oh. My. God. This could be huge...
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Ohso Clutch 11:36PM (10/10/2008)
Wow....
Can you say cluster**** on this board?
Probably not, but it fits nonetheless.
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EbcDucati 7:28AM (10/11/2008)
Cluster fornication is the p.c. term.
geo.stewart 8:45AM (10/11/2008)
I believe the term you are looking for is Charlie Foxtrot
SteveRB 11:40PM (10/10/2008)
Does anybody have an idea why this would benefit GM?
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tekd 11:44PM (10/10/2008)
Basically they would fire all the overlapping people and merge dealer networks, then gut all the underperforming brands while sharing tech.
Personally I think it's a horrible idea but chances are that GM just wants to do something big or whatever.
letstakeawalk 12:10AM (10/11/2008)
GM never figured out how to make a good minivan... so there's that.