REPORT: GM bondholders could still spur Chrysler merger
It's the General Motors and Chrysler merger saga, take three. A few months ago, GM said "No can do" to the union, taking off its ring and walking out of church. Now GM's bondholders may be contemplating a shotgun wedding, forcing The General back to the altar over the debt-equity swap the automaker needs to conclude to have a chance at more government financing.
GM needs to shed $18 billion in unsecured public debt, but the bondholders have so far been complaining about the equity they're being offered. According to an outside analyst, if bondholders think a merged GM-Chrysler will save the combined company from $6 billion to $8 billion dollars, the bondholder might only agree to the debt-equity swap if GM merges with Chrysler. GM hasn't shared its exchange plan with the bondholders yet, so the stakeholders could change their minds once they have the information.
Of course, the problems with the merger possibility don't appear to be any different than they were last time, and while it might seem appealing to "collapse two problems into one," critics say that one combined problem could be a bigger hassle for the government than the two together. The merged company would still need funding, on top of which it would need billions to simply complete the merger. In short, this deal still doesn't look like it makes sense. Hat tip to Dan.
[Source: Financial Post]
Reader Comments (Page 1 of 2)
Patrick 12:37PM (2/25/2009)
A lot of mergers are 1 + 1 = 1.7, meaning the merged company is worse off than the 2 separate companies. I see this being the case here, with GM getting the short end of the stick. What does Chrysler really have to offer GM, besides the Jeep brand and GEM? GM already has more than enough mfg capacity and the only intellectual property that Chrysler has to offer is their battery tech from GEM.
Please let Chrysler die already! It's been 30 years overdue.
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Sea Urchin 1:06PM (2/25/2009)
What does GM has to offer Chrysler?
SUVs? Pick Ups? Sports Cars? Good Small cars?
GM has one thing that Chrysler lacks, a good mid size car, Malibu but Chrysler has a great Van and is a benchmark in the class. Caravan/TaC are much more valuable than Malibu.
Also, GM has a management that should be scooping animal droppings at the local zoo or flipping burgers. Nardelli actually accomplished something in his life.
Sea Urchin 1:08PM (2/25/2009)
Just to make it clear, GM would be getting the better side of the deal in the merger, GM offers NOTHING to Chrysler or to the consumer.
jpvbs 1:18PM (2/25/2009)
Reality is 1+1 + 1.7 is still to big. The market will no longer support a big 3. If they merge the result should be more like 1.25 instead of 2. GM and Chrysler are competing for the same market. If you eliminate one of them, that frees up sales for the remaining one. Combine GM an Chrysler, keep only the best of whatever each brings to the table (the best plants, platforms, engineering, financial services etc.) and liquidate everything else they can. If they combine to equal 60% of the prior 2 companies with high quality assets across the board, they may be in good shape.
Cerebus would be happy to take whatever they can get for someone to take Chysler off their hands. GM would be in better shape with less competition - particularly if it prevents Chrysler from bringing is another competitor in with Fiat.
The Fiat deal looks like it would be a boon for Fiat as it would give them easy access to the US market. But how much does it really help Chrysler?
Patrick 2:29PM (2/25/2009)
Sea Urchin, I'm getting the hint that you are a Mopar fanboy. Chrysler has very few good products, and even those are not selling well right now. For Jan '09, Chrysler's sales figures were 137,392, vs. GM's 252,565 sales, which is almost double. Chrysler's drop in sales is also a little higher than GM's, meaning the Mopar ship is sinking faster. Couple that with no significant new product offerings over the next 2 years and Chrysler's done. (the 'new' 300 and Jeep GC shown in their Feb 17th report were merely refreshes of the existing models).
GM offers better products than Chrysler in every category except for full-size pick-up and minivans. Except for the 300, Chrysler's mainstream sedans are not good at all.
If you can actually justify your argument with some objectivity instead of your passion (which I do respect) towards Chrysler, I will listen. But so far you are just spouting nonsense. To use such black-and-white statements such as "GM offers NOTHING to the consumer" is silly and unfounded. Nardelli is not the saint you might hope for either. He tried to apply GE's six-sigma programs to Home Depot and failed, resulting in huge drops in profits.
Yikes 2:55PM (2/25/2009)
The only think I can see GM wanting from Chrysler is the Jeep Wrangler.
Yikes 12:42PM (2/25/2009)
Wow, merge to failing companies together. That makes zero sense.
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Gator 1:03PM (2/25/2009)
Know what else doesn't make sense?
:)
why not the LS2LS7? 12:42PM (2/25/2009)
Merge with what? There is very little value in Chrysler right now.
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neutralgear 12:51PM (2/25/2009)
Chrysler can be saved by the fiat 500 and alfas that they are bringing over. I think there is a lot of potential value in Chrysler. Just not from their original line up.
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why not the LS2LS7? 1:53PM (2/25/2009)
Alfa makes money selling relatively small numbers of cars at a price premium due to styling.
I fail to see how a small-market player like Alfa is going to save Chrysler. Even if the economy weren't tubing.
neutralgear 2:16PM (2/25/2009)
Because Chysler lacks a luxury vehicle that brings people to the dealership in the first place. No one even knows what their luxury vehicle is called (300C?) No one cares. Dump that, bring in the Alfa, put it on the showroom and at least get people interested in visiting the dealerships.
Ligor 12:55PM (2/25/2009)
well if the bond holders go thru with this then they are STUPID, as they will surely come out with nothing once the merged company fails and that merged company will fail miserably
they can barely make sense of how much trouble they have as single companies, now you through in another complicated task and they might as well shut their doors.
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JFer 1:00PM (2/25/2009)
I think this is a good idea!! Chrysler and GM are pretty much carbon copies this will allow them to trim some of the excess fat. Key word.. "excess"
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harlanx6 12:57PM (2/25/2009)
How much should one pay for a company that's upside down? The last time Chrysler was sold I heard DB had to pay someone to take it.
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ronEbear 12:58PM (2/25/2009)
Really makes you wonder exactly what makes these execs any different from anyone other Joe Schmoe. They certainly don`t demonstrate higher IQ`s. Is it all in "who you know" or what?
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laser 1:03PM (2/25/2009)
Hmmmmm......
Chrysler and Fiat team up....
GM absorbs Chrysler....
Fiat buys GM for $2 billion. The same money GM paid Fiat to get out of GM BUYING FIAT deal!
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Stéphane Dumas 4:27PM (2/25/2009)
#laser
by a coincidence, I spotted a text at http://www.christonium.com/automotive/ItemID=12351354136185 who mentionned the idea of a GM-Chrysler-Fiat alliance at the last paragraph of his text, looks like great minds meet ;-) it could happens unless Carlos Ghosn of Renault-Nissan decided to step on it before Fiat do.
Steve Lopez 2:03PM (2/25/2009)
I think the Chrsyler/Fiat should stand.
GM has enough issues.
Chrysler's line up needs updating and newer models.
They need to keep getting assistance and giving assistance to Nissan and still have some business dealings with Mitubishi.
Also, Peugeot and Citroen as getting on board with Fiat, it can help Chrysler with more platforms, engines and dealerships throughout the world to market their new line ups.
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the vegas style guy 8:00PM (2/25/2009)
The financial types know nothing about running a car company or providing products to actual consumers. All they know how to do is game the system.
Haven't they done enough damage to our country already?
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