GM and Chrysler to merge?

Well, this deal they have been working on seems to have stalled, because they cannot secure financial aid for such a merged entity from the US government.

North American auto manufacturers have been accused in the past of paying more attention to financial concerns (making a quick buck) at the expense of developing and maintaining a competitive, appealing product line.
And it looks like they are up to this again.

I cannot see any product-based or marketing rationale for such a merger. All this merger will do is reduce the choices available for the consumer. These 2 firms are directly competitive in pretty much all markets. They have competing products and similar engineering and manufacturing operations. I cannot see how combining the two will give any realistic competitive advantage in product, price, manufacturing and egineering efficiency....... except to reduce choce and put thousands of people out of work.

NEW YORK/DETROIT (Reuters) - A deal to merge General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Chrysler LLC has hit an impasse after the Bush administration ruled out funding for it, three people with direct knowledge of the talks said.

This puts any merger of the struggling automakers on hold until after the U.S. presidential election, the sources said.

The development adds a new element of uncertainty for the embattled U.S. auto industry as Detroit's political allies warn the sector faces a deepening financial crisis that threatens tens of thousands of jobs.

It also opens the door for Cerberus Capital Management, which owns Chrysler, to restart talks with the Nissan-Renault alliance run by Carlos Ghosn. The private equity firm has seen that option as a backstop to an outright acquisition of Chrysler by GM, one of the sources said.

The sources declined to be named as they were not authorized to discuss the private talks. GM and Cerberus declined comment.

This week, Ghosn said he sees any deals among automakers involving a cash element as unlikely unless the cash came from outside, such as from the government.

Discussions with Nissan-Renault (7201.T: Quote, Profile, Research, Stock Buzz) (RENA.PA: Quote, Profile, Research, Stock Buzz) would likely start with consideration of an expanded product-based tie-up building on an existing deal between Chrysler and Nissan, the source familiar with those talks said.

A merged GM-Chrysler would be the largest automaker by sales, but analysts have cautioned it would struggle to turn around the overlapping Detroit-based operations of two firms that have seen mounting losses tied to a global downturn.

Chrysler, which has seen its sales fall 25 percent this year, said it was moving ahead with a cost-cutting plan and with plans for new vehicles, including a plug-in hybrid.

"We are taking the tough but necessary decisions to stabilize the business in the short-term and making the viable long-term business decisions to restructure the company for the future," Chrysler spokeswoman Lori McTavish said.

GM and Cerberus have been in talks since September, according to sources.

GM had approached the U.S. Treasury in recent days about support for the merger through some $10 billion in new funding that would have included taking an ownership stake in the merged company, people familiar with the talks have said.

TREASURY STAYS AWAY

But a Bush administration official said on Thursday the Treasury Department was not negotiating direct aid for the merger.

Instead, the official told Reuters, the administration was working to speed the distribution of $25 billion in low-cost loans for automakers to retool factories, a move that was authorized by Congress last month.

With merger aid off the table, talks about combining GM and Chrysler are on hold until after the November 4 election when the parties hope to sit down with representatives of the new administration, the sources said.

A decision by the Bush administration to provide the government's first funding for the auto sector since the $1.5 billion bailout of Chrysler in 1980 had been widely seen as the merger's best chance for success.

Private investors consulted in the course of the talks have not expressed interest in providing funding for the controversial deal in the absence of government backing, people with knowledge of the talks have said.

In the absence of a deal, Cerberus pushed ahead with a restructuring for GMAC LLC, the money-losing auto finance and mortgage provider in which it owns a 51-percent stake.

The Detroit-based lender said it was in talks with federal regulators about becoming a bank holding company, which would make it easier for it to participate in a $250-billion bank recapitalization plan.

GM shares, down 76 percent since the start of the year, have reacted this week to word of its progress in the merger talks and its lobbying for federal aid. The stock closed down 10 percent on Thursday after the Bush administration official ruled out merger help from the Treasury.

Analysts have challenged the merits of a GM merger with Chrysler. Grant Thornton consultant Kimberly Rodriguez issued a study on Thursday estimating that a GM merger with Chrysler would likely cut jobs for up to 40,000 of Chrysler workers.

Democratic presidential candidate Barack Obama told NBC news in an interview he would meet with Detroit automakers and union representatives if elected.

"My hope is if I'm elected, that I'm immediately meeting with the heads of the Big Three automakers as well as with the United Auto Workers," Obama told NBC. "And to sit down and craft a strategy that puts us on a path for an auto industry that can compete with anybody in the world."

Republican John McCain's campaign has said he favors moving to disburse the $25 billion in low-interest loans already approved for the industry as a first step.

Considering the feds were on GM's ass for being too large back in the 70s, allowing them to merge with another large manufacturer doesn't seem to make any sense.

Silly thing here, these companies are failing because they've put an emphasis on short term profits over long term planning - and it's hurt everybody. They've been screwing their customers for decades, and they're screwing their employees - just so their investors can make a little cash. And now even they're going to be screwed.

Instead of staying on the leading edge, they recycled yesterdays old garbage into SUVs because the profit margins on a large vehicle are larger than they are on a small vehicle - meanwhile the rest of the world has moved ahead making more advanced, efficient, safe, and cleaner vehicles. The U.S. manufacturers took a formula for short term success and beat it to death (H1, H2, H3, anybody?)... and now it's worn out.

Capitalism only works properly when companies focus on making products not profits.

This merger is an old trick - that is, lay off some people, and suddenly you're out of the red again! Making a quick buck at the expense of somebody else's job - problem is it's not repeatable, and a great way to go out of business if you try to make it so.

Bit of a tangent here, but certainly related:

http://articles.latimes.com/2008/feb/16/business/fi-mexclunkers16

More than 3 million late-model vehicles have rumbled legally south of the border in the last 2 1/2 years. Millions more are on the way, thanks to the North American Free Trade Agreement.

That could be bad news for the Big Three U.S. automakers, for which Mexico has been an important consumer of new vehicles.

Just an interesting note here that unloading used American cars in Mexico is costing U.S. automakers sales they used to make. Another big thanks to NAFTA huh?

GM wants the Jeep and Chrysler brands only and do not want Dodge at all.

I heard a funny joke on the raido today while listening to "Whad'ya Know"

The Vatican is seriously looking into buying Chrysler and renaming it "Jesus Chrysler"

Democratic presidential candidate Barack Obama told NBC news in an interview he would meet with Detroit automakers and union representatives if elected.

"My hope is if I'm elected, that I'm immediately meeting with the heads of the Big Three automakers as well as with the United Auto Workers," Obama told NBC. "And to sit down and craft a strategy that puts us on a path for an auto industry that can compete with anybody in the world."

Moot issue now that he has been elected. Let Obama worry about it instead of depending on a lame duck President and Congress at this point in time.

I don't know about anyone else but IMO maybe GM should just file for bankruptcy protection. At least it will keep the creditors and suppliers at bay so they get through to the end of the year and beyond instead of burning over 2 billion dollars per month. GM caused most of its problems through bad business decisions and making cars that Americans don't want. They are still introducing and producing SUVs and these marketing gimmick crosssover SUVs. :screwy:

I see Pelosi has a plan which I do not agree with. :grinno:



Source: AP
Novenber 12, 2008

WASHINGTON – Democratic congressional leaders want Congress to work in a lameduck session on a financial bailout for the troubled U.S. auto industry, which is suffering under the weight of poor sales, tight credit and a sputtering economy.

House Speaker Nancy Pelosi said Tuesday she was confident that lawmakers would consider "emergency and limited financial assistance" for the auto industry under the $700 billion bailout measure that passed Congress in October. She urged the outgoing Bush administration to support a compromise.

http://news.yahoo.com/s/ap/20081112/ap_on_go_co/auto_bailout

I see Pelosi has a plan which I do not agree with. :grinno:



Preemptive damage control, perhaps? When this all turns out to be a lot tougher than they think it will be, they can point fingers at the lame duck administration for not fixing it for them?

If it works, they'll want to take credit for it; if it doesn't, they'll blame GW.

We can see why the "horse trading deals" discussed in private conversations between GW and BO were "leaked".:shakehead

I don't know about anyone else but IMO maybe GM should just file for bankruptcy protection. At least it will keep the creditors and suppliers at bay so they get through to the end of the year and beyond instead of burning over 2 billion dollars per month.

This would not be possible.
Bankruptcy protection is granted by the courts; part of the prerequisite is that the company actually does not have the dough to pay the bills (pending reorganization).
Therefore, the courts would not grant protection until GM 'burns through the money'.

Also, bankruptcy would be a very bad thing. GM depends on credit.... from its suppliers and financiers. After filing for bankruptcy, every supplier, from parts suppliers to utilities would demand money up front. This would mean GM would need billions in additional working capital to stay operating.

Furthermore, larger firms that go bankrupt generally do not honor their outstanding shares, which means billions of dollars in share value would disappear. After bankruptcy, GM would be limited in raising additional money from stock issues. Any new shares would be near-worthless.

IMO GM will receive a federal government bail out before it goes bankrupt, because, if it did go bankrupt, it could only survive by becoming a much smaller, less significant company.

Let Obama worry about it instead of depending on a lame duck President and Congress at this point in time.[/i]
Wait a minute there, weren't you the one blaming all of America's woe's on the newly elected Democratic Congress' so called majority of two years ago? My, my how things have changed.


I see Pelosi has a plan which I do not agree with. :grinno:[/i]

Have you ever seen a Pelosi plan you've agreed with? :biggrin: At least she has a plan rather than Paulson's fumbling of over half of the bailout plan and scrambling to draw up a new game plan in the sandlot after being trashed in the opening quarter.

This would not be possible.

A Chapter 11 reorganization is not only possible but feasible. It is dead wrong for any of the 700 billion dollar bailout to be used to bailout GM or any of the U.S. automakers. Some good articles and opinions below.

The Case for Chapter 11 (http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/09/Can-Bankruptcy-Save-US-Carmakers)

Imagining a G.M. Bankruptcy (http://dealbook.blogs.nytimes.com/2008/11/11/imagining-a-gm-bankruptcy/)

GM: The Threat of Bankruptcy (http://www.businessweek.com/lifestyle/content/nov2008/bw20081111_141573.htm?chan=top+news_top+news+index +-+temp_top+story)

What if GM Did Go Bankrupt. How investors, customers, and suppliers might fare under Chapter 11 (http://www.businessweek.com/magazine/content/05_50/b3963114.htm)



Wait a minute there, weren't you the one blaming all of America's woe's on the newly elected Democratic Congress' so called majority of two years ago? My, my how things have changed.

My position has not changed. And I don't recall blaming solely a Democrat majority Congress for the latest financial meltdown or all of America's woes. Just you like you were blaming solely Republicans. How about reviewing your old post below. :rofl:

http://www.automotiveforums.com/vbulletin/showthread.php?t=921821



Have you ever seen a Pelosi plan you've agreed with? :biggrin: At least she has a plan rather than Paulson's fumbling of over half of the bailout plan and scrambling to draw up a new game plan in the sandlot after being trashed in the opening quarter.

Nope. :biggrin:

Weren't you against the 700 billion dollar bailout? So now it is OK to abuse the original intention of the bailout and bailout GM? Even I disagreed with the bailout and hold the same position but obviously yours has flip flopped.

What's wrong with not buying toxic mortgages as Paulson has proposed. Must be a good reason since the dust has settled somewhat and people have regained their senses.

A Chapter 11 reorganization is not only possible but feasible.
.

Those are good and interesting articles........ I have already read some of those opinions in the past.

Those articles do indicate why any GM bankruptcy (unless ABSOLUTELY necessary) is a bad thing.

Bankruptcy is just another example of GM's lack of truly long-range planning that has plagued it for decades. Short term profits have long been the most important thing at GM.
For example, instead of building superb quality cars and thus building their reputation and customer base (like Toyota) they have built mostly mediocre, often flawed cars that are cheap to make. This erodes the bands and harms sales. Their 30 year slide in market share has been the result.

As the articles state, GM would be free of it's crippling contractual agreements with unions, suppliers, health care obligations etc, and would lower their costs. But, much fewer people.... shareholders, suppliers and especially buyers would risk working with or buying GM...... and they would still have to convince the courts that it is truly necessary.

despite lower costs, GM's survival depends on sales. Already most car buyers find reasons not to buy GM. Bankruptcy would give them MORE reasons to do so , and further erode their customer base. For years now, (except for full size trucks), GM brands have been the 'discount' choice, sold to people who want a deal, rather than preferring the brand over others.

People will buy services (ie: airline tickets) or commodities (ie:steel) from bankrupt companies. But they will not buy durable goods from bankrupt companies (except at a steep discount) because of a lack of confidence in expected durability, parts/service support and especially, residual value of the vehicle.
If GM goes bankrupt, their cars will sell the last days of DeLorean....

The last article said it best:
Stockholders, however, usually get wiped out. That fact may also play a big role in keeping GM out of bankruptcy. Even if it wanted to file, billionaire Kirk Kerkorian would do everything to fight the move. His 9.9% stake is already underwater by about $350 million. Kerkorian and other large shareholders -- many of whom have suffered longer -- could band together and force management to fix the business without bankruptcy. One source familiar with Kerkorian's tactics says he wants to see a deep restructuring plan done quickly, and outside of the courts.

That would be the best for all concerned, so long as the company faces up to the enormity of its current mess and executes a plan that finally stands a chance of working.

Those articles do indicate why any GM bankruptcy (unless ABSOLUTELY necessary) is a bad thing.

That is why I posted them versus speculating. Good to see both the pros and cons. Also, note that the articles quoted GM's CEO Rick Wagoner who is a failure and should be replaced. He is only looking out for number one.


For example, instead of building superb quality cars and thus building their reputation and customer base (like Toyota) they have built mostly mediocre, often flawed cars that are cheap to make. This erodes the bands and harms sales. Their 30 year slide in market share has been the result.

I agree but why put off what is inevitable. Can anyone say with 100% certainly the government bailing out GM will help? One of GM's major problems instead of streamlining or cutting more divisions is making cars that are the same but have different badges and banking too much on the high profit margin SUVs. :screwy:


despite lower costs, GM's survival depends on sales. Already most car buyers find reasons not to buy GM. Bankruptcy would give them MORE reasons to do so , and further erode their customer base. For years now, (except for full size trucks), GM brands have been the 'discount' choice, sold to people who want a deal, rather than preferring the brand over others.

People will buy services (ie: airline tickets) or commodities (ie:steel) from bankrupt companies. But they will not buy durable goods from bankrupt companies (except at a steep discount) because of a lack of confidence in expected durability, parts/service support and especially, residual value of the vehicle.

If GM goes bankrupt, their cars will sell the last days of DeLorean....

GM's market share has been eroding way before the current financial problems. For example Toyota is the number two ranked automaker is the U.S. and gaining more ground. Toyota's sales are lower but not as bad as GM. If we look back on the past the Chrysler bankruptcy and the days of Lee Iacocca or prior precedence that did not prevent anyone from buying their products.

People have a choice on what automobiles they purchase and there are plenty of alternatives or makes. But there are the "die hard" GM fans that will continue to purchase GM and ride out the storm. Nothing wrong with getting a good discount as an incentive.

I doubt GM will go the route of DeLorean and could come out of a bankruptcy better off in the long run.

My position has not changed. And I don't recall blaming solely a Democrat majority Congress for the latest financial meltdown or all of America's woes. Just you like you were blaming solely Republicans. How about reviewing your old post below. :rofl:

http://www.automotiveforums.com/vbulletin/showthread.php?t=921821


Nope. :biggrin:

Weren't you against the 700 billion dollar bailout? So now it is OK to abuse the original intention of the bailout and bailout GM? Even I disagreed with the bailout and hold the same position but obviously yours has flip flopped.

What's wrong with not buying toxic mortgages as Paulson has proposed. Must be a good reason since the dust has settled somewhat and people have regained their senses.

It never ceases to get old when you see someone that just continues digging a seemingly bottomless hole. :lol: Keeps the entertainment half going in this section though. ;)

But as for my input, GM needs to just stop being so blind. Like you said, they made cars that nobody really wanted that much. And after getting in all this financial trouble they go out and make an outrageously expensive Hybrid Tahoe. :rolleyes: Yeah, that should raise their market share. :rolleyes: If GM does get a rally going I hope they continue to take it into the right direction. However, I wouldn't be surprised if they did end up seeing bankruptcy.

I agree but why put off what is inevitable. Can anyone say with 100% certainly the government bailing out GM will help? One of GM's major problems instead of streamlining or cutting more divisions is making cars that are the same but have different badges and banking too much on the high profit margin SUVs. :screwy:

GM's market share has been eroding way before the current financial problems. For example Toyota is the number two ranked automaker is the U.S. and gaining more ground. Toyota's sales are lower but not as bad as GM. If we look back on the past the Chrysler bankruptcy and the days of Lee Iacocca or prior precedence that did not prevent anyone from buying their products.

People have a choice on what automobiles they purchase and there are plenty of alternatives or makes. But there are the "die hard" GM fans that will continue to purchase GM and ride out the storm. Nothing wrong with getting a good discount as an incentive.

I doubt GM will go the route of DeLorean and could come out of a bankruptcy better off in the long run.
GM must have fundamental restructuring, not only of the organization but the fundamental operating principles and management style, in order to survive.

GM has been losing market share for more than 30 years, due to fundamental mismanagement. Long before the decline of GM's market share, their management was considered a problem.
From Wikipedia:
In 1980, J. Patrick Wright wrote a book named On a Clear Day You Can See General Motors. This book, which critics acclaimed "blows the lid off the king of carmakers" was about the allegations of corruption, "mismanagement and total irresponsibility" at the top level of the company, as seen by John Z. DeLorean,

I read this book a few years ago. While it was somewhat self-serving, it had page after page after page of GM's poor, irrisponsible management which resulted in many fiascos, which were still happening long after DeLorean left the company...... like the investments in EDS and Ross Perot, Fiat, poor product planning (Chevy Vega, the downsized ('85+) personal luxury cars, etc etc etc.)

I do not think GM will change much unless all the senior management is fired.
They cannot rely on loyal customers anymore because millions of them now buy something else or have died and not been replaced.

The fundamental loss of important companies like GM has happened before. In the late 19th century, the wealthiest US companies were the railways. They were so big, rich and powerful it seemed like they could do no wrong and last forever. But market and technological change quickly reduced them to small shadows of their former selves.

Well, this is not goods news for GM and the other U.S. automakers. Announced on the ABC Evening News tonight. It is all in the hands of the politicians. Unless it is bi-partisan the votes are not there but it needs support from the American public which IMO is not there either.


Source: ABC News
Dodd to Big Three Auto: The Votes Aren't There For Bailout
November 13, 2008

An architect of the original bailout bill said today Democrats lack the votes to pass bill giving auto companies a piece of the $700 billion bailout pie next week.

Sen. Chris Dodd to ABC News: "I want to help them if we can, but I'm not going to give anyone a blank check, so we're going to try and do something if we can next week. I don't think the votes are there. Candidly, I don't think we have the votes to get that done. With no big change between now and next Wednesday, I'm skeptical."

Even after January, Democrats will have to gain some Republican support in the Senate to pass a new rescue package for the auto makers.

"People up here don't get it," fumed one Senior Republican aide off-camera. "Bailouts are less popular than Congress."

http://blogs.abcnews.com/theworldnewser/2008/11/dodd-to-big-thr.html