If Cerberus is ever going to shed itself of Chrysler, it looks like a deal will happen with soon-to-be former rival General Motors. Automotive News is reporting that no further talks have been scheduled between Nissan/Renault and the Auburn Hills-based automaker, as Cerberus has determined that the General can provide a sweeter deal that may also be better for the auto industry. It doesn't help that Nissan/Renault CEO Carlos Ghosn has decried that a deal between the two doesn't make sense during these shaky economic times.
We've never been at the table of a multi-billion dollar negotiation before, but we're pretty sure it's better to be sitting across the table from more than one company that wants what you've got. At this point, the once preposterous idea of GM merging with/buying/devouring Chrysler seems likely, and only a presidential election and a few billion dollars stand in the way of its completion.
One aspect of the possible GM/Chrysler merger often overlooked is that Daimler didn't completely divest itself of its Chrysler ownership back in early 2007, and the German automaker's 19.9% stake could get in the way of any deal. Daimler has been clear that it is disinterested in becoming part of some Detroit super conglomerate, and Automotive News is reporting that Cerberus is close to a deal to buy up the remaining 19.9% stake. Also part of the rumor mill is possible involvement with Renault/Nissan, which has been actively working with Chrysler on collaboration projects in the past year.
According to CNBC, the merger of GM and Chrysler could be complete within the next two weeks, but with neither of the two parties talking, it's all speculation at this point. Recent reports from the Wall St. Journal and CNN say that talks are rapidly accelerating, so there could be more to Chrysler/GM talks than we'd originally thought. Then again, the Internets have been wrong before.
In an announcement that should be anything but shocking to anyone who even remotely follows the auto industry, United Auto Workers head Ron Gettelfinger says he and the UAW would be against any merger between automakers that would reduce either company's workforce. Considering that the Union's main job as of late has been safeguarding the jobs of its members, we would expect nothing less than an all-out war between Gettelfinger and the automakers involved, if such a merger were to take place, as much of the potential money savings would undoubtedly be in duplicate workforce reductions. In any case, Gettelfinger says that the UAW has not officially been contacted by either party regarding anything of the sort, lending further credence to the notion that any talks that are currently taking place are very much in the early stages.
Bob Nardelli, Chrysler's current CEO, has given his employees the closest thing to an admission as we are likely to see that the company has been in serious negotiations with other automakers regarding future product plans and possibly even mergers. As has been widely reported over the weekend, Chrysler has apparently had discussions with General Motors regarding a tie-up between the two automakers, and the rumormill is churning away with stories that GM isn't the only suitor. Carlos Ghosn already has a history of merging automakers, and his Nissan/Renault partnership has naturally been recalled as a possible mate with Chrysler, as have Fiat and Tata Motors.
Remember that there's nothing concrete here to report, just speculation. At this point, all we know is that Nardelli admits that there are "third parties who are interested in exploring future possibilities with Chrysler" and that "as the company evaluates strategic options to maximize core operations and leverage its assets, we engage in a dialogue with these parties." Sounds pretty vague, wouldn't you say? These talks can be routine or they could be much more. We'll just have to keep an interested eye on the news.
Bill Vlasic, the man who was kind enough to drop the GM/Chrysler pseudo-bombshell on us late Friday night, posted a follow-up to his remarkably unremarkable story claiming that General Motors originally had talks with Ford about a possible merger before approaching the Pentastar people.
Again, the New York Times' scribe cites two unnamed sources about the merger discussions, reporting that GM approached Ford with the proposal, only to have FoMoCo execs shoot down the idea after several meetings. The talks included GM CEO Rick Wagoner, president Frederick Henderson, Ford's executive chairman Bill Ford Jr. and chief exec Alan Mulally.
According to the NYT's shy sources, the Blue Oval boys broke off talks in September when Ford and Mulally came to the conclusion that Ford would be better off reorganizing on its own rather than being tied to another automaker.
The Detroit News got in on the action yesterday, citing another anonymous source that said, "There were never in-depth, substantive discussions that went on. It was more an expression of interest [on GM's part], as in, 'Do you want to talk?'" Ford declined.
While all these reports are great at selling dead trees (and generating page-views), it deserves noting that high-level discussions between automakers are nothing new and hardly uncommon. Recent discussions – particularly those in the cited time-frame of three or four months, when federal loans to Detroit's Big Three were on everyone's lips – are surely newsworthy, let's not forget that parts sharing, from transmissions to hybrid drivetrains, have been happening routinely over the last few years. All this leads us to believe that business between Motown's finest will continue unchanged (for better and worse) and that unbelievable headlines are exactly that.
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] ____________________________________________________ This post has been Twittered. Click here to follow Autoblog on Twitter
It seems like forever ago when rumors started about a merger between Sirius and XM satellite radio. The rumors were made slightly more official when the two companies announced the "merger of equals" last year. Where have we heard that before? Nobody expected this $4.2 billion transaction to be a sprint, as there are laws with tall hurdles designed to govern this type of business deal, but this conjunction has creeped like an overloaded Tercel up a steep grade.
For more than a year we've been sitting around watching these two companies as they worked on securing shareholder approval (accomplished in November) and the endorsement of regulators (um, not yet). Now we're getting word from Sirius CEO Mel Karmazin that there may be an end in sight. During a talk at the Bear Stearns 21st Annual Media Conference, Karmazin said he "took heart" in recent FCC comments that mentioned that the body aims to rule by the end of March. "The fact that it has lingered this long, it has been interpreted... as good news," Karmazin said. Gary Parsons, Chairman of XM Satellite Radio, added that he was also confident the Department of Justice and the FCC were moving forward "...in a timely manner."
With satellite radio in need of some more customers, let's hope they can quickly put this merger in the books and focus on more important issues like signal reception and more varied content.
MG's former Longbridge, UK headquarters has been pretty quiet since production ceased in 2005. Newly-merged owners SAIC and Nanjing want the clatter of carbuilding to once again echo through the plant and plan to base their European and overseas operations there. The plant itself has the capability to build up to three different models; the challenge is deciding which of the former rival's products to build there. MG TF roadsters will likely lead the charge, with cars due at retail locations by March 1st. MG Rover holdovers could return to their roots if SAIC/Nanjing decide to build the MG 3 and MG 7, while the newly deisgned Roewe W2, pictured above, looks like a solid possibility, as well. In addition to manufacturing, R&D and sales efforts will also be strengthened. From the sound of things, it won't be long before Longbridge is once again turning out cars (some of the same cars, even) at a healthy clip.
Chrysler and Ford have been at the top of the headlines all year long for various reasons, with Ford continuing to slim down by selling off its PAG brands, while Chrysler got dumped by Daimler and went private at the hands of Cerberus Capital Management. 2008 looks to be an equally interesting year in the auto industry, and a recent article in Fortune by senior editor Alex Taylor III suggests that a merger between Chrysler and Ford could be in the cards for the coming year. Talk about your haymakers.
Much of the speculation regarding Chrysler surrounds how Cerberus intends to get itself out from under the prolific paperweight that is the Pentastar. Financial types still feel Cerberus is out to make a quick buck, and that long-term ownership is highly unlikely. We're no big business experts, but it looks to us as though the three headed dog has a very limited list of potential buyers out there, so throwing a blind-folded dart that lands on the Blue Oval is as good a guess as any. It's a crazy Chrysler news day anyway, as TTAC is reporting that Cerberus may be preparing to sue Daimler for tricking the investment firm into buying what a thought was an automaker with nowhere to go but up.
Let us know in the comments what you think about the wild speculation of the day.
Hot on the heels of Nanjing Auto's merger with SAIC, Fiat has announced it has pulled out of the automotive joint venture it had embarked upon with Nanjing.
The Sino-Italian operation had been a money-losing enterprise for years. Fiat says that Nanjing failed to live up to its commitments to the joint venture after the Chinese auto group took over MG Rover, and that the divorce will enable the Italian automaker to re-strategize its business in China. Fiat is expected to partner instead with Chery Automobiles, which just announced another joint venture with Israel Corp. Fiat and Chery are in the process of setting up another joint venture to produce 175,000 cars annually starting in 2009, and leading to the introduction of Fiat Group division Alfa Romeo to the Chinese market.
The separation affects only the cooperation between Fiat and Nanjing on the production of passenger cars, and doesn't have any bearing on Fiat's truck-building division, Iveco, which cooperates with Nanjing to build vans and with Nanjing's new parent company SAIC on trucks, the two relationships will continue unhindered.
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