Chrysler still thinks merging with GM a good idea
General Motors may have put a merger with Chrysler in its rear view mirror, but the Pentastar apparently thinks a tie-up might still be a good idea. Chrysler called a potential pairing with the General the "best option" for the Auburn Hills, MI-based automaker, saying that it would reap five times the benefit of a Fiat merger. Chrysler pointed out in its viability report to the U.S. government that the two companies would have more purchasing power, the deal would generate $36 billion in cash and another $40 billion in operating earnings.
Barclays analyst Brian Johnson points out that Chrysler is pushing for industry consolidation, saying that Chrysler feels a GM merger "would create more value than a standalone Chrysler or Fiat alliance." That has to make Fiat feel all warm and fuzzy inside. Tennessee Senator and domestic automaker critic Bob Corker agrees that a merger is in Chrysler's best interests, but questions whether a partnership is in the best interests of GM.
If it seems odd to you that Chrysler would angle for a GM merger in its official report, we're with you. For starters, GM, which initially appeared to be in favor of a merger, pulled the idea off the table back in 2008. Next, consider the fact that both automakers find themselves saddled with too many workers, too much capacity and a glut of dealers. Oh, and both companies need government loans just to stay in business past the end of the first quarter of 2009. Add to that the fact that GM's plan apparently mentioned nothing of a merger, only cuts to brands, workers, plants and dealers, or in other words, downsizing wherever possible.
[Source: Detroit Free Press, Photo by Brendan Hoffman/Getty]
Reader Comments (Page 1 of 3)
Rainy99 11:35AM (2/20/2009)
Yay the talking balloons are back! These always make me titter, like a little school girl.
Reply
TigerMil 11:38AM (2/20/2009)
U got titters?
Rainy99 11:41AM (2/20/2009)
I also have to add... What the heck would Chrysler be of any value to GM? What technology, distribution, engineering, production etc. does Chrysler have the GM doesn't? I can't think of anything GM would want.
Chrysler and Dodge need to go. Jeep needs to be sold or spun off.
Saab is gone.
Saturn is gone (even if they go separate I doubt they will survive alone).
Pontiac makes no sense... are they going to just import from Australia?
JerryB 11:59AM (2/20/2009)
Yeah, those captions are hilarious...partly because they're so appropriate.
Frank 12:57PM (2/20/2009)
Rainy99:
"I also have to add... What the heck would Chrysler be of any value to GM? "
How about this?
http://www.allpar.com/mopar/phoenix-engines.html
"This report came on November 3, 2008:
A supplier (identity confirmed) reported on Chrysler’s upcoming Phoenix V6 engines, saying that they would be certain to survive any takeovers or mergers. “They’re good on mileage and power, and they’re very quiet,” said the supplier.
According to Chrysler presentations, even the most powerful Phoenix, displacing 3.6 liters and producing (in preliminary tests) over 280 horsepower, is quieter than Toyota’s 3.3 liter V6 - and far quieter than the Toyota 3.5 liter V6. Gas mileage is said to be good, partly due to the use of high-pressure, die-cast blocks, which save on labor and allow for thinner walls and less use of aluminum. These blocks are 20 pounds lighter than General Motors‘ V6 blocks, saving around $40 per engine on aluminum alone; an independent firm estimated that these engines are at least $300 cheaper to build than GM’s current V6 line, increasing the odds of its survival of a GM merger or takeover."
Frank 1:01PM (2/20/2009)
But the real reason this is being mentioned at all is Cerberus. Cerberus doesn't care about GM or Chrysler; what they care about is GMAC and Chrysler Financial. By merging the two companies (a bad idea from any business perspective) they get control of the both finance companies. Then they can cast off the rest.
Corker knows this that's why he's not keen on it and thinks an alliance with FIAT makes way more sense ('cause it does).
the vegas style guy 1:34PM (2/20/2009)
I'm hearing banjos and a preacher and a shotgun and a Paw who has just about had it.
jamie 1:46PM (2/20/2009)
There are lots of reasons for GM to lust after Chrysler:
1. Sterling Heights flex assembly plant
2. Brampton flex assembly plant
3. HEMI
4. Phoenix V6
5. Jeep (could be integrated with Hummer)
6. Dodge Caravan
7. Dodge Ram
8. Dodge Viper !!?
9. Dodge Charger (could be moved to Oshawa)
10. Captures all of a competitor's sales
11. Puts GM as #1 for a long time to come
Problems:
1. Redundancy (must trim a lot of fat)
2. Overcapacity (must trim a lot of fat)
3. Dealerships (must trim a lot of fat)
4. Employees (must trim a lot of fat)
Overall though it is a good deal for both GM and Chrysler.
Chrysler/Dodge would be much smaller and focus on youthful entry and sporty cars and trucks. GM is having difficulty in attracting younger buyers. This would be a good fit for future considerations. GM could get the Cruze and Insignia to market quicker thereby also giving Chrysler new life.
The auto industry has to shrink considerably. This is a better option than bankruptcy as it keeps the supply chain healthier.
jamie 1:49PM (2/20/2009)
oooh!
Thought of one more good reason. The Fed is highly unlike to be supportive to any Chrysler tie up with Fiat or Nissan. So bailout money is another looming issue that would be better solved by a GM-Chrysler marriage or alliance.
Randy 1:50PM (2/20/2009)
GM is about to shed it's "Chrysler" division by tanking Pontiac, Saturn, Hummer and SAAB. So they'd be in the same position! Silly!
And.... "Phoenix" as a car ANYTHING name is cool to the ears but anyone that knows what a "Phoenix" is would stay away from the car that had a "Phoenix" anything in it..
Phoenix is a mythological bird that engulfs itself in flames and then resurrects itself.
Imagine the conversations? "It has a Phoenix engine" "so are you saying the engine engulfs itself in flames"?
LOL
BUT I think it would be a cool name for a some parts that are combustion related! Such as the "spark plugs"...
/end banter
elprogramer 2:08PM (2/20/2009)
Not only that, but building cars is a capital intensive operation; the liquidation of Chrysler's unused assets could bring in tons of cash when it's all sold and done.
skzzilla 2:10PM (2/20/2009)
I love these photos. Autoblog should re-release them as a desktop calendar, like the Far Side ones.
P.V. 5:34PM (2/20/2009)
I really like those captions. They make me giggle every time.
@Jamie:
Here's the problem. The excess "fat" outweighs any benefits GM may get from buying Chrysler Corporation.
TigerMil 11:37AM (2/20/2009)
Two words...Hemi Camaro
Make it three...Crate Hemi Camaro...
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Torrent 11:42AM (2/20/2009)
One word: This Merger should never happen.
JerryB 12:07PM (2/20/2009)
Get real.
Chevy needs a Hemi like Chrysler needs more landau roofs. Camaro buyers don't give a rat's a$$ about hemi enginens. They want small block V-8's churning out mucho horsepower (which the Bowtie boys are already bringin')
People who want a "Hemi", can buy a Challenger, Charger, Dodge Ram, Jeep Wranger, or one of the other fiftyseven and a half Chrysler vehicles that have one.
Mobius_1 1:28PM (2/20/2009)
@ Torrent:
That's one word? :)
And ZR1 Camaro > Hemi Camaro.
Soccer Mom 11:38AM (2/20/2009)
If they merged, then only one American auto company will have to file for bankruptcy, saving on service costs.
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JerryB 12:05PM (2/20/2009)
Torrent.
Dude, do you work for Chyrsler's accounting department? That's five words. :-D
geo.stewart 12:28PM (2/20/2009)
that would be Ronny G pulling Nardelli's strings on this statement.
Why would Chrysler want GM over Fiat? Simple, established US Union presence.
Fiat is all overseas. If the union starts yanking the chain, Fiat can easily pull back production and import the vehicles. Heck for that matter, Chrysler would be able to cut back production and outsource to Fiat.