Autoblog

David Cole at the Center for Automotive Research (CAR) says that there is going to be another round of mergers in the auto industry. That's not difficult to swallow, with execs at smaller companies like Renault's Carlos Ghosn having been on the hunt for good alliances for years. Even German nemeses BMW and Mercedes have been mooting the idea of working together on small engines, which doesn't sound so crazy today, but a few years ago would have had their respective fans in apoplexy.

It's Cole's suggestion that "the one company that matches up well with Volkswagen is Chrysler," that arches the eyebrow. VW knows it needs to make some moves regarding its US operations if it's to have any hope of achieving its sales objectives here or globally (it wants to be Toyota-big in the near future). That could include building a factory in the US, which the company will soon decide on, or... merging with Chrysler? Or should that be, "merging" with Chrysler?

Either way, we find that scenario highly dubious. We can't imagine VW would want anything to do with a freshly-divorced Chrysler. And we're pretty confident that the words "merge" and "merger" are 4-letter words at Chrysler for a spell. No one at VW is even hinting about anything of the kind, and the article doesn't reference anyone from Chrysler, nor does it mention Cerberus. Nor does it address the fact that VW probably won't be free to make its own decisions for too much longer without asking daddy Porsche. Although -- if Cerberus were to get Chrysler in fighting shape for sale to a carmaker that needed a turnkey solution to the US market...

[Source: The Car Connection]

The euro has reached a record high against the dollar, and that is partly to blame for rumors of Cerberus' difficulty in getting the money to pay for Chrysler. Cerberus is paying DaimlerChrysler $7.4 billion for 80.1% of Chrysler Group, but it is trying to borrow $20 billion. With interest rates on the rise, Cerberus wants to get money while terms are at their best. Yet with the market enduring a soft spot, Chrysler's below-investment-grade credit ratings, its 2-year prognosis of more red ink and the dollar declining, skittish investors are concerned that Cerberus might not be able to get the job done. Cerberus Chairman John Snow, however, said he expects the deal to close this quarter as planned.

[Source: Bloomberg]

Porsche is not going to let up on its acquisition of VW. The Stuttgart maker of neun-ein-eins has tapped into a network of 37 lenders for a $13.7 billion loan to finance its purchase of VW shares. The money will go to pay for outstanding Volkswagen shares, since VW shareholders only offered up less than one-percent of their shares when Porsche offered them below-market-value sale prices. We aren't sure if anyone outside Porsche mandarins (most of them named "Piech") really knows why the company decided it wanted to swallow VW, but it's been theorized that it's in order to prevent hedge funds from taking over and breaking up the VW group. Earlier this year it was reported that of Porsche's 1.14 billion euro fiscal profit in the first fiscal half of '07, more than one billion of it came from VW. In which case it makes sense that Porsche would do whatever possible to keep the siblings together.

[Source: Detroit News]

Forbes automotive columnist Jerry Flint provides a history lesson of various automotive couplings and even triads to illustrate that while a few have been beneficial to one or (rarely) all parties, most fall flat on their faces. None, however, are easy for any of the parties, successful or not.

Successful mergers, buyouts, partnerships, and other combos include General Motors' Daewoo purchase and its acquisition of the HUMMER name. Chryslers' purchase of American Motors (AMC) that not only gave Jeep to the automaker but a top notch engineering team. Interestingly, Renault sold its controlling shares of AMC because its French unions couldn't stand the thought of francs bolstering American products. Sound familiar, anyone?

But successful combinations are scarce. Flint discusses DaimlerChrysler's alliance with Hyundai Motors and, earlier, Mitsubishi, both of which fell apart. Ford nearly lost the Brazilian market with its ill-fated Volkswagen alliance in the "AutoLatina" venture. And Flint provides a litany on GM's failed alliances, from Fiat to Suzuki to Isuzu, and the cost of each to the company.

Flint isn't necessarily against mergers or alliances, he just points out that none of them, no matter how successful they are eventually, are ever easy.

[Source: Forbes]

The Big One -- that's an interesting thought. The Wall Street Journal has subscribed to the idea that two wrongs make a right, urging General Motors and Ford Motor Company to go in on it together to hopefully come out stronger in the end. The two would enjoy a 40 percent market share in North America and be able to better attack legacy costs (no doubt due to a much more powerful position in relation to the United Auto Workers), but the problems may outweigh the benefits -- dealerships will close, union members will strike, F-150-owning Silverado-bashers will suffer from irreconcilable identity crises, hell will freeze over and pigs will fly.

So, what do you all think? Is it time to roll out the Big One, or are the folks at The Wall Street Journal on crack?

[Source: The Wall Street Journal, via WDIV-TV]