GM and Chrysler are in Merger talks!

[Oracle of Delphi]

DETROIT — General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.

The talks between G.M. and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were “50-50” as of Friday and would most likely still take weeks to work out.

A merger would be a historic event, with two of the most iconic names in American industry coming together to survive in an increasingly difficult environment. Both have roots dating back decades in Detroit and, with Ford, long dominated the auto industry — until Japanese and other foreign car makers began making inroads into the American market.

The auto industry is being pummeled from all sides — by high gas prices that have soured consumers on profitable S.U.V.’s, by a softening economy that has scared shoppers away from showrooms, and by tight credit that is making it difficult for willing buyers to obtain loans. Both G.M. and Chrysler have been struggling with product lineups that are out of sync with consumer demand for smaller, more fuel-efficient cars.

General Motors’ stock has fallen from more from more than $42 a share last year to less than $5, and it is burning through its cash hoard at a rapid rate. Chrysler, as a private company, no longer needs to report its finances.

The meetings between General Motors and Cerberus began more than a month ago, said people familiar with the discussions, and the companies have held several talks involving their most senior executives. Given that both G.M. and Chrysler are struggling, the two sides may determine a merger may not be in their best interests.

The exploratory talks have included debates over various calculations of the savings that would result from a merger, these people said, but neither side has yet to dig into each others’ private financial books and records.

At the same time, Cerberus is continuing to hold talks with other automakers including Nissan and Renault, said people familiar with the discussions. It is unclear at what stage those discussions have reached.

Speculation about a possible bankruptcy filing by G.M. has mounted in recent weeks because of the automaker’s dwindling cash reserves. The automaker had $21 billion in cash on hand at the end of the second quarter, but it was burning through more than $1 billion a month.

The credit rating firm Standard & Poor’s put G.M. on negative credit watch on Thursday.

But G.M. has said it is confident that it can increase its liquidity, and emphasized in a statement released Thursday that it was not considering a bankruptcy filing.

G.M. once commanded about 50 percent of market, but its share so far this year has fallen to 22 percent, according to the research firm Autodata. Chrysler had a market share of about 15 percent before acquisition in 1998 by Daimler, but its share this year has dwindled to 11 percent.

How government and labor react to a potential merger of G.M. and Chrysler is unclear. There could be antitrust questions raised, but political issues could be overshadowed by the precarious financial prospects of both automakers.

If G.M., the nation’s largest automaker, combined operations with Chrysler, the smallest of Detroit’s Big Three, they would create an auto giant that would surpass Japan’s Toyota Motor Company, which recently has been battling G.M. for bragging rights as the world’s largest automaker.

A G.M. spokesman declined to comment on any specific talks with Chrysler. “Without referencing this specific rumor, as we’ve often said G.M. officials routinely discuss issues of mutual interest with other automakers,” said the spokesman, Tony Cervone. There was no immediate comment from Cerberus.

People briefed on the deal said the talks started as an exploration of possible joint venture opportunities between G.M. and Chrysler.

Cerberus acquired an 80.1 percent stake in Chrysler in August 2007 for $7.4 billion from the German automaker Daimler AG.

Under the terms of the deal being discussed, Cerberus would end up owning an unspecified equity stake in G.M.-Chrysler, according to people briefed on the talks.

The ramifications of the merger would be enormous in the global auto industry. G.M. and Chrysler together would control more than 35 percent of the United States vehicle market, and be by far the dominant producer of pickup trucks, sport utility vehicles and minivans.

It would also marry such iconic American brands as G.M.’s Chevrolet and Cadillac with Chrysler’s Jeep and Dodge divisions.

However, the potential merger carries enormous risks. Both G.M. and Chrysler are struggling mightily in what is the worst market for vehicle sales in the United States in 15 years.

People close to the discussions said that if the prospective deal did not happen, Cerberus would probably look to Nissan and Renault.

But the marriage of G.M. and Chrysler has far more potential than hitching Chrysler to a foreign automaker. While G.M. and Chrysler may be hamstrung by labor contracts from cutting jobs, the two companies could combine dealers, product lines and advanced vehicle technology.

link: http://www.nytimes.com/2008/10/11/business/11auto.html?hp

[enzl]

Just what GM needs:

More brands.

More dealers.

More red ink.

Great move by Cerberus, terrible move by GM.

They kicked Nissan/Renault to the curb for this move?

It's got to be a ploy by Cerberus to get Ghosn to step up and buy Chrysler, as there's absolutely no business reason in the world for GM to do this.

[longtooth]

G.M. and Chrysler Explore Merger

By BILL VLASIC and ANDREW ROSS SORKIN

Published: October 10, 2008

DETROIT — General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.

http://www.nytimes.com/2008/10/11/business...amp;oref=slogin

Come Watson the game is afoot. Could it work? Enquiring minds might like to savage this topic.

Sweet side-deals with Nissan and others could come of this.

Edited October 11, 2008 by longtooth

[Oracle of Delphi]

Just what GM needs:

More brands.

More dealers.

More red ink.

Great move by Cerberus, terrible move by GM.

They kicked Nissan/Renault to the curb for this move?

It's got to be a ploy by Cerberus to get Ghosn to step up and buy Chrysler, as there's absolutely no business reason in the world for GM to do this.

Give it a chance enzl. There are worse alternatives.

Edited October 11, 2008 by Pontiac Custom-S

[longtooth]

Cash? Would size matter? GM's been reducing themselves 'nicely' for some time now.

[Oracle of Delphi]

Cash? Would size matter? GM's been reducing themselves 'nicely' for some time now.

What would you say if there were discussions to spin off GME, GMDAT and GM Holden? Or to close GMNA down altogether?

[longtooth]

What would you say if there were discussions to spin off GME, GMDAT and GM Holden? Or to close GMNA down altogether?

It wouldn't surprise me. Even as it'd likely put me out to pasture ungraciously.

[mustang84]

I don't like the sound of any of this.

[longtooth]

I don't like the sound of any of this.

Oh c'mon, elaborate.

[Oracle of Delphi]

I like the fact that I will now be able to to buy a Jeep with my employee discount, but it's a hell of a way to get a new minivan.

[longtooth]

The Challenger and Camaro would morph into the 'Chimera'.

[balthazar]

>>"There could be antitrust questions raised..."<<

With only 37% of the market ?? Business that slow at the DoJ ??

[LastMercury]

50-50 chance? really?

Just doesn't seem like an intelligent move to me.

[Blake Noble]

Well, I can tell you this: if GM merges with Chrysler, the Europeans will once again screw the Chrysler side of things over. At least Mercedes helped Chrysler with rear-drive cars, the first thing that GME will do is take the 300/Charger/Challenger right off the market and replace them with front-drive compact cars.

[cletus8269]

wouldnt this be like

taking on passengers from

[vonVeezelsnider]

Oh God

[loki]

jeep is the best brand...hemi is the best tech... isn't the rest fluff? rape and pillage? no, i would only care if it happened not as the last resort.

[longtooth]

More insight into the motivation for such a deal.

WRAPUP 1-GM, Chrysler in merger talks-source

Sat Oct 11, 2008 1:02am EDT

http://www.reuters.com/article/marketsNews...20081011?rpc=44

[Teh Ricer Civic!]

wouldnt this be like

taking on passengers from

No its more like

This...

Taking on passengers from...

Edited October 11, 2008 by Teh Ricer Civic!

[mustang84]

Oh c'mon, elaborate.

GM has a deep enough hole to dig out of by itself...they don't need any more extra baggage with Chrysler.

GM-Chrysler = Chevrolet, Dodge, Pontiac, Saturn, Chrysler, Buick, Cadillac, GMC, Jeep, Saab, Opel, Holden, Vauxhall. That is one big mess. It will only give GM another excuse to kill off or neuter more brands. Say goodbye to Pontiac and GMC, and maybe Dodge or Chrysler if this happens.

Merging GM and Chrysler will further dilute what makes each company unique.

[02ChevySS]

What would you say if there were discussions to spin off GME, GMDAT and GM Holden? Or to close GMNA down altogether?

I would say, as with 90% of your self-affirming, subtle I'm-better-than-you posts, its so full of &#036;h&#33; that I can smell it through my cable modem.

[longtooth]

GM has a deep enough hole to dig out of by itself...they don't need any more extra baggage with Chrysler.

GM-Chrysler = Chevrolet, Dodge, Pontiac, Saturn, Chrysler, Buick, Cadillac, GMC, Jeep, Saab, Opel, Holden, Vauxhall. That is one big mess. It will only give GM another excuse to kill off or neuter more brands. Say goodbye to Pontiac and GMC, and maybe Dodge or Chrysler if this happens.

Merging GM and Chrysler will further dilute what makes each company unique.

It'd be piece-mealed anyway in the largest garage sale in this hemisphere if nothing's done. A reconstituted GM/Chrysler would have Trucks, Luxury, Bread & Butter vehicles. Access to funding. It'd whittle the UAW down to near insignificance. Even beyond where they exist in a 'Pleasantville'-type limbo now. Old coots such as myself would retire and meet for lunch and tell stories and enjoy our status as anachronisms all the more. Happy to have been there and pleased to be out.

[mustang84]

And that calls for some photoshopping.

[Teh Ricer Civic!]

And that calls for some photoshopping.

Why the heck isn't the Chrysler symbol on the laser part?

[VenSeattle]

GM should just treat Chrysler like Daewoo... wait for Chrysler to fall apart (if it actually happens) and then buy the pieces it wants. Either that or just let Nissan/Renault deal with it (which is what I think will happen.)

[traumadog]

What's interesting in this is that Cerberus already owns 51% of GMAC... so I wonder how much of a meltdown this would really cause.

In any case, GM's small-car portfolio is much stronger than Chrysler's, so I'd bet it'd be Chrysler's part that gets the ax. Of course, they could ditch Pontiac and make the G6 the new Sebring, the G3 a new Neon, G8 the new 300, etc...

In any case, it could depend on how much cash Cerberus has on-hand - with GM's market cap currently around $3 billion, it could be bought outright via leveraging on asset sell-off (kinda like what happened with K-Mart and Sears).

[Croc]

There is no value in the Chrysler, Dodge or Jeep brands for GM. None whatsoever.

[ZL-1]

There is no value in the Chrysler, Dodge or Jeep brands for GM. None whatsoever.

Agreed. Also, one of the links posted refers to a swap in which Cerberus would get GM's stake in GMAc and GM would get the Auto operations of the Chrysler Group. So....... no cash involved? You swap assets to get assets that burn cash? Or has Chrysler magically turned around into a cash generating business?

[Drew Dowdell]

Well... there's your guys answer for what will replace the Zeta platform...... it'll be the LX.

[frogger]

GM needs more models and dealers competing with each other.

[smk4565]

I thought about this a year or so ago when Chrysler was for sale. The only way it works is if the new company sheds a bunch of dead brands like Dodge, Saab, and Hummer and repositions the leftovers, but Chrysler has become over 40% fleet sales, so they have lost the status to be positioned between Chevy and Cadillac. Chrysler has nothing of value to offer GM, it would just be more brands and dealers at this point, and a dated, uncompetitive product lineup. Bad idea to merge.

It would make more sense to merge with Ford, make Saturn small import style cars again, GMC, Pontiac, Mercury, Hummer, Buick, Saab die, Ford and Chevy handle mainstream, Lincoln is a step up, and Cadillac is a step up from that. Although they could probably keep Buick as well and keep them as soft luxury and Lincoln a little more tech and sportiness like Acura and Infiniti.

[daves87rs]

GM+ Chrysler= FAIL

That is the bottom line folks.

What can Chrysler bring to the table? NOTHING.

At this point, I don't think Jeep would even be worth it-They haven't been building real jeeps lately (not counting a few).

And you think GM has a few quality issues? Do we really need to bring issues like bad trans minivans) and cooling issues (Avenger "chill zone") here?

The last thing we need is more baggage.

They would just be better going out of business....granted, unless you wanted a good new TV show....

[Satty]

Well... there's your guys answer for what will replace the Zeta platform...... it'll be the LX.

Sweet, more overweight RWD rental cars.

[usonia]

I don't know, this all sounds like a media created story to me. I've thought about this from multiple angles and I can't come up with any sort of logic as to how it makes sense for either company.

Edited October 11, 2008 by usonia

[Robert Hall]

Give it a chance enzl. There are worse alternatives.

Maybe they could rename the combined company 'American Motors'.

Some interesting possibilities. GM has the better FWD compact and midsize lines, GM has the better full size truck and SUV lines (though that market is in decline). Jeep is a credible, international 4WD brand, could replace HUMMER. Chrysler has minivans that actually sell pretty well. Chrysler has an excellent full-size RWD platform (and GM seems to be giving up on theirs). I don't know...seems like a lot of brand and model overlap..not sure what the upside is beyond maybe a better chance at survival?

Edited October 11, 2008 by moltar

[Blake Noble]

... If the new company sheds a bunch of dead brands like Dodge ...

Next time you have a thought, any thought at all, just do us all a favor and let it go. That little statement just made your whole argument invalid. Bravo.

Edited October 11, 2008 by YellowJacket894

[maxximus1]

nice knowing you chrysler. i loved and enjoyed driving my jeep grand cherokee when i had one awhile back.

i personally dont see any car that would be an asset to gm, except maybe the jeep wrangler and thats it!

[vonVeezelsnider]

Autoblog's reporting that a spokesman for Chrysler has refused to "Confirm or Deny"... Maybe it's happening as you'd think if this story was Buffalo Chips somebody from one of the companies would categorically deny it?

I suppose in a Merged ChryCo and GM situation it would look something like this:

Safe: Chevy, Cadillac, Jeep, Opel

Question Mark: Buick, Chrysler, Saturn

Dead as a Doornail: Dodge, Pontiac, GMC

[Sixty8panther]

Holy $#it! it's too early in the morning for this.

This coud be terrible, yes... but what if, WHAT IF!? it went well and could

be executed the right way? I could see the ultimate company emerging!

------

The Hindenburg was supposed o be filled with 100% harmless helium, not hydrogen.

We, the USA refused to supply Nazi Germany with helium... the rest is history, as we

have seen in those photos from New Jersey & heard in the "Oh the humanity" audio.

The Titanic's doom (Achilles's heel) was FOUR FOLD:

1. Hubris

2. Not enough lifeboats (see no.1)

3. Poor quality of steel, made worse in ultra-frigid waters

4. Design of the (non-sealing) water compartments

[Sixty8panther]

Well... there's your guys answer for what will replace the Zeta platform...... it'll be the LX.

Don't threaten ME with good news!

[CARBIZ]

We're being told that GMAC's funds are drying up fast. If Cerebrus has access to cash, then that could be what 'Chrysler' brings to the table: a life line. Other than the minivan, there is nothing that Chrysler sells that I would want in my show room.

I think most of this is smoke and mirrors. If GM hopes to pry any cash out of Washington, they need to make it look like they are exploring all options - even one as patently silly as merging with Chrysler.

As has been said, we need fewer brands, not more; fewer dealerships, not more. Dammit, I am sick of having my throat cut by P-B-GMC dealers as it is. The last thing I need is the same rates/programs over at Dodge/Jeep.

[Lamar]

Well... there's your guys answer for what will replace the Zeta platform...... it'll be the LX.

Lateral move at best... LX can't support a 6A, Zeta can't be AWD (I think).

[evok]

Or how about GM takes the $11 billion Chrysler supposedly has on hand while picking select Chrysler assets for themselves and closes/liquidates the rest of Chrysler LLC. 2009 is projected to be one of the worst years in 25 years. I highly doubt the market will miss Chrysler and Dodge.

GM needs the cash not Chrysler LLC.

Edited October 11, 2008 by evok

[Oracle of Delphi]

Or how about GM takes the $11 billion Chrysler supposedly has on hand while picking select Chrysler assets for themselves and closes/liquidates the rest of Chrysler LLC. 2009 is projected to be one of the worst years in 25 years. I highly doubt the market will miss Chrysler and Dodge.

GM needs the cash not Chrysler LLC.

Aren't you the smart boy! I've said for over a year, GM needs to have Jeep.

Edited October 11, 2008 by Pontiac Custom-S

[cire]

There are no products in any Chrysler/Dodge/Jeep showroom that GM needs. Absolutely nothing.

I would rather see Chrysler merge with Renault/Nissan.

A GM/Chrysler merger would be like 2 drunks trying to help each other across a busy street...

I could see the 2 automakers forming some collaboration deals to save some development costs, but a total merger seems like a foolish deal.

[Oracle of Delphi]

If y'all remember, GM wanted Chrysler before Cerberus won out the last time.

Edited October 11, 2008 by Pontiac Custom-S

[Sixty8panther]

That would be selfish and sad.

I would miss Chryser, Dodge & Jeep. SPEAK FOR YOURSELF, the market would not miss them.

That's a great plan.... have Hon-DUH & Toyo-DUR pick up a nice big chunk of their market share.

Without Chrysler, their LX platform, (V10/Cummins TD-I6) Ram pickups of the 1990s, and other daring products like

Viper, Prowler, and even the PT, the American car market would be much sadder and more pathetic.

This may be a GM forum but spitting on Chrysler's image, history & importance is despicable.

[Robert Hall]

There are no products in any Chrysler/Dodge/Jeep showroom that GM needs. Absolutely nothing.

GM could use their minivans, since GM has given up on them. And Jeep would give them some good compact and midsize SUVs.

[CMG]

A total merger seems like a waste to me too.

GM has a couple of good vehicles, the Corvette, the imported Holdens. Chrysler has the new Dodge Ram and the LX/LY cars...

Both are bringing out electric vehicles soon if one believes the hype... but from what I hear the cost will probably ruin their sales as well.

Cerberus is a MONEY management type company, what would they want with GM in a time of economic downturn? I'm guessing it's NOT gonna happen.

[PurdueGuy]

Yup, Jeep is the only brand I can see having value for GM, though how much value is questionable, as the media makes SUVs "evil". GM could still make Hummer into a real jeep competitor, but it's obvious they won't (and their money is better spent elsewhere anyway). Yeah... if this goes through, I'm sure we can look forward to several brands being axed.